It depends on what the invoice covers. Qualifying energy-saving materials (ESM) supplied and installed by a contractor in a domestic building are currently zero-rated at 0% under HMRC Notice 708/6, not 20%. If your contractor has charged 20% on a line that involves supply-and-installation of insulation, a heat pump, solar PV, or another qualifying measure, that may represent an overcharge on that element. However, not all works on a retrofit project qualify: general building works (roofing, plastering, structural work), materials purchased by the homeowner, and ESM works that are incidental to a general building contract are correctly charged at 20%. The key question is how your project's work packages have been structured and described on the invoice.
On a £40,000 qualifying ESM element (external wall insulation, heat pump, solar PV), the difference between 0% and 20% is £8,000. This rate is determined at the point the invoice is raised. A contractor who defaults to 20% on qualifying ESM — because they are unaware of the relief, or because the scope is bundled with general renovation — applies an incorrect rate that can, in some circumstances, be corrected if identified before the project is complete.
If an invoice line covers supply-and-installation of qualifying insulation, a heat pump, solar PV, or another measure listed in Notice 708/6, and the contractor has charged 20%, that line may have been incorrectly rated. The 0% rate applies to qualifying ESM supply-and-install until 31 March 2027.
Structural works, roofing, plastering, brickwork, groundworks, fit-out, and other general building services are standard-rated at 20% regardless of their connection to an energy retrofit. These do not qualify for the ESM rate.
If the qualifying ESM is incidental to a larger general building contract (for example, a builder fitting cavity wall insulation as part of a full renovation project), the single-supply rule may mean the whole contract is correctly at 20%. The ESM rate is not a general discount on invoices that mention insulation.
Ask your contractor to confirm the VAT rate applied to each element, the HMRC basis for the rate, and whether they are treating the ESM element as a separate qualifying supply or as part of a general construction contract. This review is most useful before the next invoice is issued.
VATBuild is not affiliated with HMRC. References to HMRC publications are for informational purposes. Always consult a qualified tax adviser before making decisions about VAT on your project.
VATBuild checks each invoice line on your retrofit project against the qualifying ESM conditions in Notice 708/6 and flags any line where 20% appears to have been charged on a potentially qualifying supply-and-install element. It generates a review report identifying which invoices and which contractors may need to be followed up — structured around the specific HMRC rules that determine the correct rate.