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04 September 2023

Gas Boiler Prices Could Rise by £300 Plus VAT in Heat Pump Rush

The UK’s biggest boiler manufacturer has said that it will need to increase the price of gas boilers by as much as £300 due to a government scheme to aimed at spurring on the amount of heat pumps installed into UK homes ...

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Tax Levy on replacement boilers for UK Homes.

Worcester Bosch, the UK’s leading supplier of domestic gas boilers has written to it’s installer network informing them of potentially huge price increases due to a government framework known as CHMM (Clean Heat Market Mechanism).

Essentially, The CHMM framework policy is intended to incentivise the adoption of low-carbon heating technologies in the UK. The CHMM would apply to boiler manufacturers that sell more than 20,000 gas boilers, or 1,000 oil boilers, annually, and would impose an obligation on those manufacturers to sell an annual quota of heat pumps or hybrid heat pump systems. These proposals would apply to Worcester Bosch and almost all of the UK’s leading boiler manufacturers.

From January 2024, affected manufacturers would be legally required to match or substitute a minimum of 4% of their boiler sales with the sale of heat pumps or hybrid systems, rising to 6% in year two, and ultimately progressing to around 25% of their boiler sales by 2028. Under the current proposals, for every heat pump that an obligated manufacturer is short of their quota, the manufacturer will be fined £5000, or alternatively they may be able to purchase a trading credit from a heat pump manufacturer that is not subject to CHMM.

Currently, the UK market for heat pumps does not exist at sufficient scale for manufacturers to satisfy the proposed CHMM quotas for heat pumps or hybrid heat pump systems, particularly as sales for new build properties will not count towards the quotas that obligated manufacturers will have to achieve. Therefore, we consider it inevitable that an obligated manufacturer we will not be able to achieve the proposed quotas and will face inevitable and significant financial penalties either through HMM fines or purchased trading credits.

This means that UK manufacturers of domestic gas boilers we will have no choice but to pass on (or add) the cost of these punitive fines (or boiler lax) as a CHMM Levy onto the cost of boilers to ensure that they can sustain a financially viable business, continue to invest in low-carbon products and maintain our supply of HVAC products to the British public.

This means that prices will increase by as much as £300, then add the cost of VAT and the true costs becomes much closer to £360. Meaning the average installation cost of a new boiler could increase from £2,000 to potentially over £2,360.

We see this as yet another tax on the British working person. We’ll keep you updated on developments as further information becomes available. The consultation is expected to be published around 23rd October 2023.

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