Air conditioning VAT is not one rate for every job. Many cooling-only and commercial installations are standard-rated at 20%. HMRC Notice 708/6 says a zero rate can apply, until 31 March 2027, to the installation of specified energy-saving materials including certain permanently fixed air source heat pumps in residential accommodation and some charitable buildings. HMRC also notes that most air conditioning units are air source heat pumps, with the facts of each product deciding treatment. From 1 April 2027 the energy-saving-material relief is due to revert to 5% unless the law changes. This is an explainer, not tax advice. The VAT-registered installer must apply the correct rate on the invoice.
Start from the invoice, not from a forum rumour
Searches for air conditioning VAT, 0 VAT on air conditioning and 5 VAT on air conditioning spiked because reversible splits sit on the boundary between 'air con' and 'heat pump'. The legal test is in VAT legislation and Notice 708/6, not in a product brochure that says inverter.
Supply-only equipment that you fit yourself is generally standard-rated. Relief, where it applies, is about installing qualifying materials in qualifying buildings. DIY kits and portable units are the wrong place to expect 0%.
- Ask the installer to state the VAT rate and the Notice 708/6 basis.
- Say whether the building is a dwelling, mixed use or fully commercial.
- Confirm the equipment is permanently fixed, not portable.
- Do not withhold VAT on a guess if the installer has standard-rated the job.
Residential reversible systems versus cooling-only
HMRC's published understanding is that most air conditioning units are air source heat pumps, and that fixed air source heat pumps can reverse to provide cooling as well as heating. In cases of doubt, the facts of the particular product decide whether it is treated as an air source heat pump.
A cooling-only commercial cassette in a shop is a different profile from a permanently installed reversible split in a house. Mixed-use buildings, landlords, holiday lets and offices need extra care. Get the treatment in writing before comparing two quotes that used different VAT assumptions.
Dates that change the rate
Zero-rating for specified energy-saving-material installations runs from 1 May 2023 to 31 March 2027 on HMRC's published notice. From 1 April 2027 those installations are due to revert to the 5% reduced rate unless the rules change again. Always check the notice for the tax point of your job.
BUS grant eligibility and VAT relief are separate. A job can qualify for one and not the other. Read the air-to-air heat pump grant guide alongside this page.
How to compare quotes fairly
Demand VAT-inclusive totals and a line that states 0%, 5% or 20% with a short reason. A quote that is £500 cheaper only because it omitted VAT is not cheaper. If two installers disagree on the rate, ask each to cite the notice section rather than arguing on WhatsApp.
This site cannot certify your VAT position. If the sums are large, the installer should take advice. You can also read Notice 708/6 yourself before paying a deposit.
Frequently asked questions
Is domestic air conditioning zero-rated?
It can be, if it is a qualifying permanently fixed air source heat pump installation in qualifying residential (or certain charitable) premises under Notice 708/6 and the tax point is in the zero-rate window. Many jobs remain 20%. The installer must decide and invoice accordingly.
Is commercial air conditioning 20% VAT?
Usually standard-rated, because the energy-saving-material relief is aimed at residential accommodation and certain charitable buildings, not typical shops and offices. Confirm with the VAT-registered contractor.
Does 0% VAT mean I also get the BUS grant?
No. VAT relief and BUS are different regimes with different tests, including MCS for BUS. Check both independently.
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How this guide was prepared
This guide was written by the Local AC Installers Editorial Team. We compare official guidance, legislation and established consumer information, separate general information from project-specific advice, and show publication dates and sources. We do not accept installer accreditation claims at face value.