0% VAT Quoting for Solar & Heat Pumps: How AI Gets It Right First Time

One misapplied VAT rate turns a competitive quote into a lost job — or a £2,000 hole in your margin. The relief on solar, batteries and heat pumps sounds simple: zero-rated until 2027. In practice, the exceptions catch installers out every week. Here is what qualifies, where quotes go wrong, and how AI settles the rate for you.

What does 0% VAT cover on solar, batteries and heat pumps?

Zero-rated VAT covers the supply and installation of qualifying energy-saving materials in residential accommodation, in force until 31 March 2027. It applies to the whole installed package — equipment plus labour — not the hardware alone. Solar PV, air-, ground- and water-source heat pumps, battery storage, heating controls and insulation all qualify when an installer fits them (HMRC, 2024).

The list of qualifying work is broad, but each item shares one condition: the installer supplies and fits it.

• Solar PV panels and their mounting systems, fitted to a home.
• Air-, ground- and water-source heat pumps, including the labour to install them.
• Battery storage — alongside solar or, since 1 February 2024, as a standalone retrofit (Solar Energy UK, 2024).
• Groundworks for a ground-source heat pump: trenching, drilling and dredging to lay the ground loop (HMRC VENSAV, 2024).
• Central heating and hot water controls, draught stripping and insulation.

From 1 April 2027, the rate is scheduled to rise to the reduced rate of 5% — so any quote for work completed beyond that date needs a different calculation (House of Commons Library, 2024).

Where does VAT quoting go wrong for installers?

Quotes go wrong when an installer treats every energy-saving job as automatically zero-rated. The relief is narrower than it looks: it hangs on who installs the materials, what else sits in the contract, and how the materials cost compares with the total. Four traps account for most errors (HMRC, 2024).

• Materials without installation: Selling panels or a heat pump for the customer — or another trade — to fit is standard-rated at 20%. Only supply-and-fit earns the relief (HMRC, 2024).
• The 60% test: Where the materials cost more than 60% of the total installation value, only the labour is relieved; the materials themselves revert to the standard rate (HMRC VENSAV, 2024).
• Part of a wider job: When energy-saving materials sit inside a larger refurbishment, extension or conversion contract, the relief can fall away entirely — there is no apportionment to save part of it (Saffery, 2024).
• Non-residential property: The relief applies to residential accommodation and buildings used solely for a relevant charitable purpose. Most commercial installations do not qualify (APHC, 2026).

How is 0% VAT applied across common installation jobs?

The VAT treatment of a job depends on how HMRC views the supply. A solar array with a battery fitted the same day is a single supply and fully zero-rated; the same battery sold on its own follows a separate rule. The table below maps the scenarios installers meet most often.

What does one VAT error cost on a quote?

A single wrong rate moves real money. Take an illustrative £10,000 solar-and-battery installation that qualifies for the zero rate. Applied correctly, the customer pays £10,000. Charged at the standard 20% by mistake, the same job is quoted at £12,000 — £2,000 that either prices you out of the work or comes off your margin if you absorb it.

The error runs both ways. Zero-rate a job that should carry 20% — a commercial roof, or a heat pump buried in a renovation contract — and HMRC can reclaim the unpaid tax from you, not the customer. On thin installation margins, one reassessed job can wipe out the profit on several.

The stakes are highest exactly where the rules are least intuitive: the 60% test, standalone batteries, mixed contracts. That is the argument for letting the quoting system decide the rate rather than trusting it to memory at the kitchen table.

How does AI apply the correct VAT rate to every quote?

AI applies the correct rate by reading the job as it is built — the property type, the technologies fitted, whether installation is included and how the materials-to-labour split falls — and setting the VAT line automatically. autarc builds this logic into its AI-assisted quoting, so the 0% relief and its exceptions apply per line rather than resting on the estimator's recall.

In practice, that means the software does the checks an experienced estimator would — every time, on every quote.

• Reads the scenario: a supply-and-fit job in a home, a materials-only order, or work inside a wider contract.
• Applies the 60% test from the materials and labour already entered, and flags when the materials tip the balance.
• Keeps VAT consistent across the team, so the newest estimator prices a job the same way as the owner.
• Carries the current rule set — including the scheduled move to 5% from April 2027 — so quotes stay right as the relief changes.

Conclusion: Get the VAT rate right at the quote, not at the invoice

The 0% relief is worth up to a fifth of every qualifying job — but only when it is applied to the right work, on the right property, in the right contract. Until 31 March 2027, installers who quote it correctly win on price without touching their margin. The safest place to settle the rate is the quoting tool itself.

autarc: quoting that gets VAT right on the first pass

Pricing VAT by hand across dozens of quotes a month invites exactly the errors that cost the most. autarc puts the rate where it belongs — inside the quote, applied automatically as each job is built. Book a free demo and an autarc team member will show you the platform live.

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References

• Demystifying the application of VAT to energy-saving materials in residential properties – APHC, accessed 30 July 2026, aphc.co.uk
• Energy-saving materials and heating equipment (VAT Notice 708/6) – GOV.UK (HMRC), accessed 30 July 2026, gov.uk
• VAT – energy-saving materials – Saffery, accessed 30 July 2026, saffery.com
• VAT Energy-Saving Materials manual (VENSAV3160) – GOV.UK (HMRC), accessed 30 July 2026, gov.uk
• VAT on solar and battery storage – Solar Energy UK, accessed 30 July 2026, solarenergyuk.org
• VAT on solar panels and other energy-saving materials – House of Commons Library, accessed 30 July 2026, parliament.uk