Heat Pumps Today

www.acrjournal.uk/heat-pumps 21 L E G I S L A T I O N makers started to understand what our sector had been talking about for years. It paved the way for discussions with HM Treasury Department where we could put the case across for re-instating reverse cycle air conditioning heat pumps into the scope for the scheme for reduced rate VAT on low carbon heating products, which eventually led to the change of position by HMRC in their updated VAT Notice 708/6 published on 6th April 2022 valid from 1st April until 31st March 2027. 2.18 Air source heat pumps Air source heat pumps use the air as a source of heat. They absorb heat from the outside or surrounding air and transfer that into useable heat in the home for space or water heating. Fixed air source heat pumps can be reversed so that they can draw heat from inside a building, thus providing cooling during the summer as well indoor heating for colder periods of the year. Only air source heat pumps that are permanently fixed and are not portable or moveable qualify as energy-saving materials. HMRC’s understanding is that most air conditioning units are air source heat pumps. However, in cases of doubt, deciding whether any particular product is to be treated as an air source heat pump will depend on the facts of the case. The defining factor for eligibility is that the air source heat pump can be used to heat the home, so even if it is sometimes used for comfort cooling it is still now eligible. After the heatwave we have seen this past Summer that is a bonus for anybody who has installed an air source reverse cycle heat pump in their home certainly. Even more important to the responsible sector in levelling the playing field for contractors is that the reduced VAT rate applies to the installation of the energy saving heating products, but not the supply only of the products or materials. So, the online sellers of split systems – a sales route which has long been a bone of contention for contractors being undercut by the cowboy sector – must charge the standard rate of 20% VAT on their goods; whereas the legitimate contractor can buy the goods from a reputable wholesaler with 20% VAT included, which they claim back as an input in the VAT return as normal, but they only apply a 5% VAT rate in their final bill to the domestic or residential customer. The end users win because they now have clarity as to what the VAT rate should be, and the legitimate contractor wins because they are no longer undercut by the rogue trader element. The biggest challenge we face The bulk of the buildings we will be using in the net zero target year of 2050 have already been built, so retrofitting low carbon solutions is the biggest challenge we face. With the playing field now levelled off both homeowners and responsible contractors now have a bigger choice of potential solutions in meeting that challenge.