VAT on air source heat pumps

[Simpo Two]

I'm getting quotes for an air-conditioning system, and many of them now include as ASHP as part of their function.

I gathered from previous posts on PH that in this case they were zero-rated, and indeed the first quote I got back had 0% VAT.

The second quote came in yesterday and has VAT at 20%. When I queried this the reply was: 'They are not classed as ASHP as per the authorities, therefore it is subject to VAT.'

Who's right?

[ctdctd]

Zero rated seems correct.

https://www.gov.uk/guidance/vat-on-energy-saving-m...

"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, or both.

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 as 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 each case."

[Simpo Two]

Thanks very much.

The supplier states 'They are not classed as ASHP as per the authorities, therefore it is subject to VAT.'

I replied 'Which authorities are you referring to please? HMRC is the ultimate arbiter of course. Need to be clear on this as it's a non-starter otherwise.'

We'll see what come back...

[caziques]

It's either an air sourced heat pump, or it isn't.

An air sourced heat pump will have a compressor, evaporator and fan and would then be zero VAT by definition.

Any link you can post? Not sure I'd trust anybody who doesn't know what a heat pump is.

[Simpo Two]

caziques said:

It's either an air sourced heat pump, or it isn't.

An air sourced heat pump will have a compressor, evaporator and fan and would then be zero VAT by definition.

Any link you can post? Not sure I'd trust anybody who doesn't know what a heat pump is.

ctdctd posted an HMRC link, though it has a get-out clause.

One difference is that with an a/c system the ASHP is a 'bonus extra'; the system is not part of a full ASHP installation. Anyway, it will be interesting to see what matey comes up with. It may be that they are falsely charging VAT...

[ctdctd]

Simpo Two said:

ctdctd posted an HMRC link, though it has a get-out clause.

One difference is that with an a/c system the ASHP is a 'bonus extra'; the system is not part of a full ASHP installation. Anyway, it will be interesting to see what matey comes up with. It may be that they are falsely charging VAT...

I had 3 quotes for an air-con wall split system, one from a big supplier and two from local companies - all were zero rated VAT.

[Simpo Two]

ctdctd said:

I had 3 quotes for an air-con wall split system, one from a big supplier and two from local companies - all were zero rated VAT.

Mine says: 'Following my site survey last week, as discussed, I have quoted you for a 2-way multi-split system, which is composed of 1no. outdoor unit and 2no. indoor unit. Indoor units will be wall-mounted and white in colour. Cost will be £4,558.00 + VAT.'

(for a Panasonic Free Multi System Z R32 and two Etherea units)

Seems a very expensive price even before the VAT; what does the panel think?

[Terminator X]

Why do you care OP? Surely the zero rated VAT quote is cheapest so just go with that?

TX.

[SamR380]

Was that the price for supply only or did that include delivery/installation? VAT would be added for any associated works, which is maybe why they have quoted "+VAT" rather than "+20%VAT" as it wouldn't be 20% of the whole invoice. It's also possible they don't understand VAT, have made a mistake, or are even trying it on.

[Simpo Two]

Terminator X said:

Why do you care OP? Surely the zero rated VAT quote is cheapest so just go with that?

They're quoting for different equipment, so it's not quite a level playing field.

SamR380 said:

Was that the price for supply only or did that include delivery/installation? VAT would be added for any associated works, which is maybe why they have quoted "+VAT" rather than "+20%VAT" as it wouldn't be 20% of the whole invoice. It's also possible they don't understand VAT, have made a mistake, or are even trying it on.

It just said '+VAT'. Not even a rate.

Anyway, the salesman has, to his credit, e-mailed me back with a chunk from the same HMRC page as posted above and said: 'Outcome: the VAT used to be 5% and it’s very recently that the GOVT has outlined that the air conditioning (looks like it can be considered as ASHP now) wouldn’t carry VAT. Please see extract that snipped from govt web'

If it's an innocent mistake, we wonder how many people have paid VAT to them in error, whether the company will contact them and reimburse them, and why the company accountant was asleep! There is also of course the possibility they are chancers.

The question remains why their Panasonic units are almost twice the price of Fujitsu (which he said were noisy and unreliable...)

Well done PH, another victory for truth and justice

[Sim_Nugget]

I’ve just recently priced up an install and the hardware is VAT free.

I had to get a new 30A electrical circuit fitted which was £700 as it had to go round the house and through a few rooms.
The a/c install was £4300 without VAT on the hardware which was LG, I wanted 2 Artcool interior units and the exterior unit is 5 head to future proof for a loft conversion so overkill at the mo.

Checkout cooleasy.co.uk for rough hardware prices.

S

[Simpo Two]

Sim_Nugget said:

I’ve just recently priced up an install and the hardware is VAT free.

I had to get a new 30A electrical circuit fitted which was £700 as it had to go round the house and through a few rooms.
The a/c install was £4300 without VAT on the hardware which was LG, I wanted 2 Artcool interior units and the exterior unit is 5 head to future proof for a loft conversion so overkill at the mo.

Checkout cooleasy.co.uk for rough hardware prices.

S

Thanks; unfortunately the PC won't load that site and the laptop throws up a security warning...

[Sim_Nugget]

It is a lame site.

Here are the LG prices including VAT.