VAT Exemption Under 708/6 for Water-Cooled Heat Pumps?

There are currently three companies (that we're aware of) selling water-cooled (not water-source) heat pump systems with 0% VAT quoting the 708/6 exemption. Our interpretation is only water-source heat pumps would be exempt because they are using the natural latent heat within the body of water as an energy source (a "green" source). A water-cooled system simply connects into the incoming water supply of the premises - a paid utility. Can you please provide a definitive response on whether water-cooled heat pumps qualify for 0% VAT or not.

Could we possibly get a response to this enquiry, please?

Hi,
Energy-saving materials, when installed in residential accommodation or, from 1 February 2024, a building intended for use solely for a relevant charitable purpose, qualify for relief when they consist of any:

•    controls for central heating and hot water systems (read section 2.8)
•    draught stripping (read section 2.9)
•    insulation (read section 2.10)
•    solar panels (read section 2.11)
•    wind turbines (read section 2.12)
•    water turbines (read section 2.13)
•    ground source heat pumps (read section 2.14)
•    air source heat pumps (read section 2.15)
•    micro combined heat and power units (read section 2.16)
•    wood-fuelled boilers (read section 2.17)
Water-cooled heat pumps are not on the list covered by the relief and are therefore not eligible.
Installations of energy-saving materials
Thankyou.

Thanks for reply, but you just missed the section on water source heat pumps (2.18). Below is the wording: 2.18 Water source heat pumps These transfer energy from natural heat stored in a body of water. They can also be used to augment existing heating systems in the same way as solar panels. From 1 February 2024, the supply of dredging of a body of water, in order to install pipework, or other equipment, necessary for the operation of a water source heat pump, qualifies for the zero rate. Where such dredging is carried out by the installer of a water source heat pump (at the same time as the installation) they normally fall to be ancillary and form part of a single zero-rated supply (read section 2.5). Please can you provide a ruling on whether water-cooled heat pumps would qualify as a water source heat pump under this section 2.18 because it is a "natural" resource used in the heating / cooling process of the equipment instead of electricity.

Hi
If the supply is a water source heat pump (you would need to look at the specification documents) and was made after 1 February 2024 then it can be zero rated. If it does not meet both of these criteria then it would be standard rated.

 

Thank you. Can you confirm what the HMRC's definition of a water-source heat pump is please. As mentioned above, the equipment we are asking for guidance on (water COOLED) does not draw the latent heat from a natural body of water such as a pond, lake, river, or the sea. It connects into the incoming water supply of the premises. Does an incoming water supply (a paid utility) qualify under the opinion of HMRC as water-source?

Hi Wayne,
I have contacted our Policy team regarding water-cooled pumps.
We will need you to provide more details of the product (technical specifications, designs, pictures, other documents) in order to see whether it qualifies for the relief.
Please contact us as below:
VAT: general enquiries.
Thank you.



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