VAT reduced on Air Source Heat Pumps
As announced in the 2005 Budget, with effect from 7 April 2005, the installation of air source heat pumps in residential accommodation and certain charity buildings, will become subject to the reduced VAT rate of five per cent.
This will provide a welcome reduction in cost to consumers installing heat pump air conditioning systems to domestic homes in the UK - In most cases it will be cheaper for consumers to fit heat pump systems rather than cooling only systems.
The reduced VAT rate only applies to equipment which is both supplied and fitted to residential accommodation - supply only equipment is still subject to the standard 17.5% VAT.