Reduced rate VAT – 5% – applies on installation of Ground Source Heat Pumps

The reduced rate will remain fully available (except on wind and water turbines) after 1 October 2019 for supplies of services of installing "energy saving materials" in residential accommodation where the supply is made to a qualifying person (a person who is aged 60 or over or is in receipt of certain benefits), a relevant housing association or where the residential accommodation is a building or part of a building used solely for a relevant residential purpose.

Otherwise, the reduced rate will be available (except on wind and water turbines) provided that the value of the "energy saving materials" does not exceed 60% of the total value of the supply of installing the "energy saving materials". If the value of the "energy saving materials" exceeds 60%, then only the labour cost element will qualify for the reduced rate (with the supply of the materials being standard rated).

Installation of any of the following energy saving materials in residential accommodation qualifies (subject to the paragraphs above) for the lower rate of VAT:

The lower rate of VAT applies if the energy saving materials are installed and the work is done on residential accommodation.

The lower rate applies on any necessary extra work that needs to be done as part of the installation. For the installation of a ground source heat pump system this includes the heat pump, the ground loop, system controls and any other installation ancillary to the supply. Because a ground source heat pump installation generally provides heat at a lower temperature than a fossil fuel boiler there may be a need to increase the number or size of the radiators as part of the ancillary work or to install underfloor heating. See Heat Emitter Guide.


This page summarises advice given in HMRC VAT Notice 708/6 Energy-saving materials.

RHI is available on installation of Ground Source Heat Pump Systems

Owners acquiring new GSHP systems are eligible to receive Renewable Heat Incentive for the use of ground source energy and for heat generated by solar thermal systems for domestic hot water.

See RHI for domestic buildings.