Do damp proofing products save energy?

Currently it is possible to qualify for the reduced rate of VAT (currently 5%) when supplying and fitting energy-saving materials in existing residential accommodation.  With this in mind it is important to be aware of the recently issued statement from HM Revenue & Customs (HMRC)  pertaining to damp proofing properties.

On 20 July, HMRC  issued a statement confirming its policy that damp proofing products, including paints, creams and gels, do not qualify as energy-saving materials and therefore do not qualify for the reduced  rate of VAT. The reasons behind this are:

 

  • The dominant purpose of damp proofing products is to water-proof exterior walls as opposed to improving thermal efficiency.
  • There is no conclusive evidence that damp proofing products improve the thermal efficiency of brickwork and if such evidence became available, it is likely that any improved thermal efficiency would be incidental to the dominant purpose of the products, which is water-proofing.
  • Damp proofing products are not normally described as insulators.
  • Damp proofing products are sold, or held out for sale, as water-and-damp proofing products and not as insulators.
  • The VAT legislation refers to the installation of energy-saving materials, which indicates that the legislation more naturally refers to typical insulators, such as cavity wall insulation, rather than the damp proofing products which are applied.

HMRC has confirmed, in Revenue and Customs Brief 9 (2018) that from 1 September 2018 the standard rate of VAT should be applied to the supply and fitting of damp proofing products in existing residential accommodation.

For more information please contact the Garbutt + Elliott VAT Team.

Disclaimer: This document is intended as a general guide and is not a substitute for advice.