5%VAT RATE ON CERTAIN SOLID FUEL APPLIANCES
As part of the UK government's commitment to reducing carbon emissions and promoting renewable energy sources The Value Added Tax (Reduced Rate) (No. 2) Order 2005 (in force 1st January 2006.) has introduced a 5% VAT rate for "boilers designed to be fueled solely by wood, straw or similar vegetal matter."
5% VAT RATE FOR CERTAIN SOLID FUEL APPLIANCES
SOLIFTEC GUIDANCE STATEMENT
This Soliftec Guidance Statement has been confirmed, as of 26th August 2006, by HM Revenue & Customs Policy Unit as being a correct interpretation of the law.
We are asked to point out that this is not an official publication of HM Revenue and Customs, who cannot take responsibility for the contents of the guidance from Soliftec.
To qualify for the 5% VAT rate:
The appliance must be a boiler, and must be strictly a vegetal-matter only burning appliance. Excluded are:
- Appliances which are in any way capable of burning wood and also other fuels ('multifuel' appliances).
- 'Modular' boilers where the boiler is supplied separately from the burner unit and where the user is offered a choice of, for instance, oil, gas, coal or wood burners to fit to the boiler.
- Dual fuel appliances with, for instance, an oil or gas back-up burner within a wood-burning appliance.
- Wood-only appliances for which a coal or multifuel conversion kit is available.
The intention is to promote wood-fired central heating, so the installation of an add-in domestic hot-water to a wood-only appliance would not qualify. We take 'central heating' to mean a water output >7.5kW, and 'boiler' to mean a appliance the majority of the heat output of which goes into water for circulation.
The appliance must be fired by vegetal matter, which we take to mean solid matter containing cellulose. On this basis VAT rules have previously included peat as 'vegetal matter', but, as it has a regeneration time of 1000years+ we do not consider it to be a renewable fuel and therefore it is not within the spirit of this legislation to claim the reduced rate on a peat, lignite or mill-peat installation.
The installation must be in either (1) residential property, or (2) a building used for 'relevant charitable purpose'. Commercial properties are excluded.
The reduced rate applies both to the supply of the boiler and its installation to the extent that it is a vegetal-matter installation. Thus chimneys and flues, heating systems and heating system controls are excluded, but control systems supplied or installed necessarily to operate the vegetal-matter appliance are included.
(a) A straw-only burning boiler with an automatic feed mechanism is supplied along with a heating system to heat a farmhouse
The boiler and the fitting of the boiler will attract the 5% rate. The associated flue system, the heating circuit, system controls and hot water system, which could be used with any fuel, will be standard rate. If the appliance also heats non-residential parts of the farm, eg outbuildings, the entire installation will be standard rate.
(b) A wood pellet roomheater is supplied and fitted in residential property.
Although such an appliance can only burn wood, it is not a boiler, and is therefore subject to the standard rate.
(c) A new modular central heating boiler with a wood-only burner and feed system is fitted to an existing heating system in a residential property.
Modular boilers can have their burner unit changed with relative ease. The 5% rate would apply only to the purchase and installation of the burner unit, its feed system and their associated control system, not to the supply or installation of the boiler itself.
(d) A wood-only boiler is fitted, along with a new heating system, into a residential property. No radiator is fitted in the room where the boiler is installed, which is expected to be heated by surplus warmth from the boiler casing.
Even though the boiler here is being used in part as a roomheater, as long as the majority of its heat output is supplying water then the appliance and the installation of the appliance will qualify for the 5% rate. The associated flue system, the new heating circuit, system controls and hot water system, which could be used with any fuel, will be standard rate.
(e) A manufacturer supplies a wood-only boiler to a retailer.
This does not qualify for the 5% rate, as the boiler is not at that point being supplied for residential use but for retail use. If the retailer then supplies it directly to a residential householder for use in their home, then the 5% rate would apply.
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