Biodiesel micro-CHP systems could be VAT-reduced

With the UK's rate of VAT increasing to 20 per cent from Tuesday, January 4th, micro-combined heat and power (micro-CHP) systems which operate on biodiesel and other eco-friendly fuels could qualify for a reduced rate of the tax.

A number of products and services - ranging from food for human consumption to the installation of energy-saving equipment - are charged at a reduced VAT rate of five per cent.

This extends to micro-CHP systems and their installation, which could include biodiesel boilers capable of generating both heat and power.

"You can only get these lower rates if the energy-saving materials are actually installed and the work is done on your home," HM Revenue & Customs advises.

The government body confirms that the reduced rate of VAT at five per cent applies both to the materials used in the installation and to the cost of labour involved in carrying out the work.