Explanatory note

This Order, which comes into force on 7th April 2005, amends Group 2 of Part II of Schedule 7A to the Value Added Tax Act 1994 (“Group 2”). Part II of Schedule 7A contains the Groups of supplies of goods and services that are subject to the reduced rate of VAT of 5%.

Article 3 of the Order amends Group 2 (installation of energy-saving materials). Paragraphs (i) and (j) are added to the list in paragraph 1 of the Notes to extend the reduced rate to supplies of the services of installing (1) air source heat pumps and (2) micro combined heat and power units in certain buildings and to supplies of the air source heat pumps and micro combined heat and power units so installed.

By virtue of items 1 and 2 of Group 2, the installation must be in residential accommodation or in a building intended for use solely for a relevant charitable purpose.

A full regulatory impact assessment of the effect that this instrument will have on the costs of businesses is available at www.hmce.gov.uk.