Do you have to pay VAT on heat pump installation?

A zero rate applies to the installation of certain specified energy-saving materials, including heat pumps, from 1 May 2023 to 31 March 2027. This means the supply and installation service is exempt from VAT.

Here's some important points:

• The relief applies to installing energy saving materials in residential accommodation and charitable buildings.

• This zero-rated VAT applies only if you hire a contractor to both supply and install the heat pump.

• If you buy the heat pump yourself and then hire someone separately for installation, the materials (heat pump) will likely have standard VAT applied, while the installation labour itself might be zero-rated.

It is common for other goods and services to be provided at the same time as the installation of energy saving materials, these can also be zero rated as long as they constitute a single supply and are ancillary to the energy saving material. This could include upgrading radiators or installing underfloor heating.

A zero rate also applies to the groundworks necessary for the installation of ground and water source heat pumps within the curtilage of residential or charitable buildings.

For clear and official information, you can refer to the UK government's VAT Notice 708/6 on Energy-saving materials and heating equipment:

https://www.gov.uk/guidance/vat-on-energy-saving-materials-and-heating-equipment-notice-7086