VAT
VAT is chargeable at the reduced rate for the installation of energy saving materials and heating equipment or security goods. At present (June 2009)the standard rate of VAT is 15%. The reduced rate is 5%
 
But if energy-saving materials are supplied without the supplier installing them, the supply of the goods would be standard rated. Only the installation would be reduced rated. Installation, in this context, means putting in place energy-saving materials.
This involves some process by which materials are permanently fixed in place, although loft insulation may simply need to be unrolled and positioned in place to be installed.

Any work that is undertaken as part of the installation process is eligible for the reduced rate.
This includes minor building works, such as planing doors or windows, enlarging loft hatches, and painting or plastering to make good.
But if the installation of energy-saving materials is incidental to another supply  - such as the building of an extension or the replacement of a roof - you are making a single supply of construction services then the supply and installation would be standard rated

The reduced rate applies to installations of:
 central heating and hot water system controls 
 draught stripping 
 insulation 
 solar panels 
 wind turbines
 water turbines  
 ground source heat pumps 
 air source heat pumps 
 micro combined heat and power units 
 wood-fuelled boilers (not wood-burning stoves)

The reduced rate only applies to the installation of the energy-saving materials listed above.
The reduced rate does not apply to the installation of other energy-efficient products, such as energy-efficient boilers, secondary or double glazing or low-emissivity glass.

The above is a brief summary of VAT and energy saving installations. For more information click here to visit the HMRC website