Wayne Tica

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?

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.

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

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.