VAT for Wood Burner Installers: The £90,000 Threshold, the Reverse Charge, and Whether the Flat Rate Scheme Is Worth It

Most one-man-band and small-team installers spend years below the VAT threshold without thinking about it much, and then have a season where the diary fills up, the average job creeps past £2,500, and suddenly turnover is close to £90,000 with three months of the year still to go. At that point VAT stops being an accountant's problem and becomes a pricing problem, because a 20% liability on your sales that you haven't planned for eats straight into the margin on every job you've already quoted.

When you actually have to register

The rule is based on rolling 12-month turnover, not the tax year and not profit. If your taxable turnover for any rolling 12-month period goes over £90,000, you have to register. That's true even if you expect the next month to be quiet. The trap most trades businesses fall into is checking this once a year instead of monthly; turnover can cross the line in June and you won't notice until your accountant does the annual accounts the following spring, by which point HMRC can charge a penalty for late registration on top of the VAT itself.

Once you're over the threshold, you have 30 days from the end of the month in which you crossed it to register, and your effective VAT registration date is the first day of the second month after that. So if you go over on 15 July, you must register by 30 August, and you're VAT-registered from 1 September. That means every invoice you raise from that date needs VAT added, whether or not you'd already quoted the job without it.

That last point catches installers out constantly. If you quoted a £4,000 job in June assuming no VAT and the job doesn't complete until October, you're now either absorbing £800 of VAT out of your own margin or going back to the customer to explain why the final invoice is higher than the quote. Building a VAT-registration trigger into how you quote (even a rough "am I close to £90k this year?" check before agreeing a big job) avoids that conversation entirely.

The domestic reverse charge: the part that trips up installers working with contractors

If most of your work is direct-to-homeowner, this section won't affect you much. If you regularly install for building contractors, developers, or as a subcontractor on new-build or renovation projects, it will.

Since March 2021, VAT-registered subcontractors working within the Construction Industry Scheme (CIS) don't charge VAT to a VAT-registered contractor customer on standard or reduced-rated work. Instead, the contractor accounts for both the output and input VAT themselves on their own return, in what's known as the "reverse charge." Installation of heating systems is explicitly covered, and a wood burner or stove installation reads as heating system installation for these purposes, so if you're fitting a stove for a main contractor on a new-build who is themselves VAT-registered and CIS-registered, the reverse charge applies and your invoice should say "reverse charge applies" with no VAT added, rather than the usual 20%.

Get this wrong in either direction and it's a problem: charge VAT when the reverse charge should apply and the contractor's accounts team will bounce the invoice back at you; fail to apply it when it's due and HMRC can query it at inspection. The reverse charge doesn't apply when you're invoicing the actual homeowner or end user directly (normal VAT rules apply there), so the practical habit worth building is asking, for every contractor-instructed job, whether the customer is VAT-registered, CIS-registered, and not the end user. If all three are true, no VAT on that invoice.

Should you use the Flat Rate Scheme?

Once registered, you don't have to use standard VAT accounting. The Flat Rate Scheme lets a small business (turnover under £150,000 excluding VAT to join) pay a fixed percentage of gross turnover to HMRC instead of the difference between output and input VAT, which cuts down on the bookkeeping.

For trades, HMRC's published sector categories put "General building or construction services" (which explicitly lists building equipment installers alongside electricians, plumbers, and joiners) at 9.5%, provided materials make up 10% or more of what you turn over. If your work is genuinely labour-only with minimal materials, you'd fall into the "labour only" category at 14.5% instead, which is worth checking carefully since it's the opposite of what a lot of installers assume: doing less materials work pushes your flat rate up, not down. There's also a "limited cost trader" test. If your goods spend is under 2% of turnover (or under £1,000 a year), you're pushed onto a 16.5% rate regardless of sector. That shouldn't apply for most stove installers buying liners, stoves, and fixings, but it's worth checking against your actual supplier spend rather than assuming.

New VAT registrants also get a 1% discount off their flat rate for the first year, which makes the scheme worth a proper comparison against standard VAT accounting for your first twelve months specifically.

The honest answer on whether Flat Rate is worth it depends entirely on how much VAT you reclaim on materials, van costs, and tools. An installer buying a lot of stoves and liners wholesale and reclaiming VAT on most of it often comes out ahead on standard accounting rather than flat rate, because the flat rate percentage is built around an average business in the sector, not your specific cost structure. It's a five-minute conversation with an accountant using your last twelve months of actual purchase invoices, not a decision to make on a rule of thumb.

Keeping the paperwork straight once you're VAT-registered

The admin burden that catches installers out isn't usually the maths, it's the record-keeping: knowing at a glance which invoices had VAT added, which were reverse-charge, what your rolling 12-month turnover looks like without waiting for year-end accounts, and which jobs are still sitting as unpaid invoices when your VAT return is due regardless of whether the customer has actually paid you yet (standard VAT accounting is usually done on invoice date, not payment date, so an unpaid invoice can still mean a VAT bill).

This is the point where the job and invoice tracking most installers already keep in a spreadsheet or a notebook stops being enough. You need to see turnover trending toward £90,000 before your accountant tells you, and you need every invoice correctly flagged as standard, reduced, or reverse-charge at the point you raise it, not reconstructed months later. BurnerCRM tracks job value and invoice status against each customer as you go, so the numbers a VAT decision depends on are already sitting there rather than needing to be pulled together from separate systems when the question comes up. You can see how it fits into the rest of the job workflow at burnercrm.co.uk.