Heating, water supply, sanitation and drainage installation is inside CIS. And the zero rate on installing energy-saving materials ends on 31 March 2027 — the most time-sensitive VAT date in the trade.
Section 74(2) of the Finance Act 2004 puts the installation in any building or structure of systems of heating, water supply, sanitation, drainage, ventilation and air-conditioning squarely inside the Construction Industry Scheme. Add ordinary repair, alteration and extension work on buildings and structures, and most of what a plumbing and heating business does is CIS-reportable.
What is outside is the manufacture of components for those systems, and their delivery to site. Making and delivering is out; installing is in. For a business that prefabricates anything, the treatment follows what the contract is actually for.
Whether a job is a construction operation decides two things at once, not one. It decides whether the payment is inside CIS — and because the VAT domestic reverse charge takes its scope from the CIS definition, it decides the VAT treatment on the same invoice. Get the scope question wrong and you get both wrong together.
Installing energy-saving materials in residential accommodation is zero-rated from 1 May 2023 to 31 March 2027. From 1 April 2027 it reverts to the 5% reduced rate. That is a hard cliff edge with a date on it, and it is the single most time-sensitive VAT item facing a heating business.
| Qualifying from the start | Added 1 February 2024 |
|---|---|
| Controls for central heating and hot water systems; draught stripping; insulation; solar panels; wind and water turbines; ground and air source heat pumps; micro combined heat and power units; wood-fuelled boilers | Water source heat pumps; batteries for storing electricity; smart diverters; groundworks for ground or water source heat pump pipework |
Two conditions worth being exact about. The relief applies only where the materials are installed — a supply-only sale of a heat pump is standard rated. And from 1 February 2024 the relief also covers buildings used solely for a relevant charitable purpose.
| Work | Rate |
|---|---|
| Constructing a building designed as a dwelling, or for a relevant residential or charitable purpose, in the course of construction | Zero |
| Changed number of dwellings conversion; non-residential to residential conversion (never used residentially, or not for 10 years or more); renovating a dwelling empty for 2 years or more | 5% |
| Repairs, maintenance, extensions and alterations to an existing occupied dwelling | 20% |
Treating an extension as though it were new build is the most common mis-rating in the trades, and it is expensive in both directions. Note too that zero-rated supplies are outside the reverse charge — so on a new build the reverse charge question does not arise, while on the extension next door it does.
Boilers, cylinders, pipe, fittings and radiators you buy yourself reduce the CIS deduction base, because you directly incurred them. The same items bought by the contractor and recharged to you do not. Travel and subsistence stay inside the base in every case — which on a trade that covers a wide patch is a real number.
Installing systems of heating, water supply, sanitation and drainage in a building or structure is expressly a construction operation, so most plumbing and heating installation is inside CIS, as is repair, alteration and extension work on buildings generally. What is excluded is the manufacture of components for heating, ventilation, drainage, sanitation or water supply systems and their delivery to site — making and delivering is out, installing is in. Sanitary ware you buy and fit is a material you directly incurred, so it comes out of the payment subject to deduction — provided the invoice identifies it.
31 March 2027. Installing energy-saving materials in residential accommodation has been zero-rated since 1 May 2023, and from 1 April 2027 it reverts to the 5% reduced rate. That is a hard, dated cliff edge and it is the most time-sensitive VAT item in the trade — worth factoring into how you quote work that will be installed either side of it. Batteries for storing electricity, smart diverters and groundworks for heat pump pipework were added to the qualifying list on 1 February 2024, so the relief now covers more of a heating job than it did.
Controls for central heating and hot water systems, draught stripping, insulation, solar panels, wind turbines, water turbines, ground source heat pumps, air source heat pumps, micro combined heat and power units and wood-fuelled boilers. Added on 1 February 2024: water source heat pumps, batteries for storing electricity, smart diverters, and groundworks for ground or water source heat pump pipework. From the same date the relief also covers buildings used solely for a relevant charitable purpose. Crucially, the relief applies only where the materials are installed — supply-only is standard rated.
Yes, and this is the most common mis-rating in the trades. Constructing a building designed as a dwelling is zero-rated where the conditions are met. Repairs, maintenance, extensions and alterations to an existing occupied dwelling are standard rated at 20%. So the same bathroom is zero-rated in a new house and standard rated in an extension to an existing one. And since zero-rated supplies are outside the reverse charge, the two answers diverge on more than just the rate. The four “designed as a dwelling” conditions decide the zero rate, and the one that catches people is the prohibition on separate use or disposal that planning consent often puts on an annexe.
Three months of statements or returns, and a straight account of what is wrong and what it is costing.
One short email: what has changed in CIS and construction VAT, the dates coming up, and one number worth checking on your own invoices. No spam, unsubscribe any time.