0% VAT Quoting for Solar & Heat Pumps: How AI Gets It Right First Time
🔍 The essentials at a glance
- Supply-and-fit of solar, batteries and heat pumps is zero-rated in homes until 31 March 2027.
- Materials-only sales, wider refurbishments and the 60% test are where installers lose the relief.
- VAT treatment turns on the job type — single supply, standalone battery or groundworks each differ.
- One wrong rate on a £10,000 install shifts £2,000 between the customer, your margin and HMRC.
- autarc’s AI applies the correct VAT rate to each line as the quote is built.
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).
- 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% (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. 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.
- 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.
- Part of a wider job: When energy-saving materials sit inside a larger refurbishment, extension or conversion contract, the relief can fall away entirely.
- Non-residential property: The relief applies to residential accommodation. Most commercial installations do not qualify.
How is 0% VAT applied across common installation jobs?
| Job scenario | VAT treatment | Why |
|---|---|---|
| Solar PV and battery, fitted together in a home | 0% on the whole job | Single supply — the battery helps the customer enjoy the solar installation. |
| Standalone battery retrofit to an existing home | 0% on supply-and-fit | Qualifying since 1 February 2024. |
| Ground-source heat pump with groundworks | 0% incl. trenching and drilling | Preparatory groundworks form part of the qualifying installation. |
| Scaffolding to fit roof panels | 0% | Ancillary to the qualifying installation. |
| Panels supplied only; customer or another trade fits them | 20% standard rate | No installation by the supplier — materials alone do not qualify. |
| Heat pump inside a full house-renovation contract | Relief may not apply | Part of a wider refurbishment — no apportionment to rescue part of it. |
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.
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.
- 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.
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.
autarc: quoting that gets VAT right on the first pass
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.
💬 FAQs
Does 0% VAT apply to landlords and rented homes?
Yes, residential accommodation qualifies whether it is owner-occupied or rented. The installer must still supply and fit the qualifying materials.
What happens to VAT on these installations after 31 March 2027?
The zero rate is scheduled to revert to the reduced rate of 5% on 1 April 2027. Quotes for work completed after that date should be priced at 5%, not 0%.
Can a customer claim 0% VAT if they buy the equipment themselves?
No, buying materials without installation is standard-rated at 20%. The relief applies only when the installer both supplies and fits the equipment as a single job.
Is a consumer-unit or fuse-board upgrade zero-rated?
Only if it is genuinely ancillary to the qualifying installation. Wider electrical work that would have been needed regardless of the solar or heat pump is standard-rated.
Do I still show VAT on a zero-rated invoice?
Yes, a zero-rated supply is still a taxable supply: show it at 0% and keep the usual records. Zero-rated is not the same as exempt or as charging no VAT at all.
Does zero-rating a job stop me reclaiming VAT on what I bought in?
No, because zero-rated sales are taxable supplies, you can still recover the input VAT on the materials and overheads used for that job.
Does the relief cover Northern Ireland as well as Great Britain?
The zero rate now applies across the UK, including Northern Ireland, which was brought into line in 2023. The same qualifying conditions and the 2027 reversion date apply.
References
- Demystifying the application of VAT to energy-saving materials in residential properties – APHC, accessed 30 July 2026, https://aphc.co.uk/news/demystifying-the-application-of-vat-to-energy-saving-materials-in-residential-properties/
- Energy-saving materials and heating equipment (VAT Notice 708/6) – GOV.UK (HMRC), accessed 30 July 2026, https://www.gov.uk/guidance/vat-on-energy-saving-materials-and-heating-equipment-notice-7086
- VAT – energy-saving materials – Saffery, accessed 30 July 2026, https://www.saffery.com/insights/articles/vat-energy-saving-materials/
- VAT on solar and battery storage – Solar Energy UK, accessed 30 July 2026, https://solarenergyuk.org/resource/vat-on-solar-and-battery-storage/
- VAT on solar panels and other energy-saving materials – House of Commons Library, accessed 30 July 2026, https://researchbriefings.files.parliament.uk/documents/CBP-8602/CBP-8602.pdf