Following communications with HMRC earlier in the year related to the application of VAT on energy savings materials, the Plumbing & Heating Contractors Alliance -. the overarching body for plumbing and heating businesses in the UK - advises that HMRC has now issued revisions to its guidance on VAT and energy saving materials.
In May 2011, APHC and SNIPEF issued warnings to the industry to make sure they applied the appropriate VAT rate when installing heating systems. This followed increasing industry confusion about when and how the lower rate could be applied, with installers receiving dramatically different messages depending whose advice they took. HMRC has now produced further guidance about the application of VAT on energy saving materials.
Notice 708/6 November 2011 seeks toclarify a number of issues relating to VAT, with the main point of interest for plumbing and heating engineers being the guidelines in section 2.3, which give more specific advice on the VAT rate to be applied to energy saving materials installed with other works.
John Thompson, Chief Executive, APHC said: "We are pleased that our dialogue with HMRC has been productive. These updated guidelines mirror the advice HMRC provided in a letter to us in response to our enquiries. At the time we received the letter in the summer, we advised members and the wider industry to think very carefully when applying VAT to certain types of work and we would reiterate this advice. Now that the guidance is laid out in black and white, Id urge all installers to take the time to read it."
Robert Burgon, Chief Executive, of SNIPEF, added: "The clearer guidance from HMRC is welcomed as many installers have been confused by the information which has been circulating about this issue" Both trade bodies do, however, agree that a policy change is needed to allow the lower rate of VAT on all home improvement work as a stimulus to the plumbing and heating sector which has been hit hard in the recession. A policy change in this area would also address the complexities of VAT application on energy saving materials."