Grants and funding for commercial HVAC
There is genuine funding for commercial HVAC — but it is the tax system, not a grant. The £7,500 Boiler Upgrade Scheme is a flat grant towards air-source and ground-source heat pumps up to 45 kWth in homes and non-domestic buildings in England and Wales; it does not fund VRF, chillers or air handling units. Here is what actually applies in 2026, marked live-law or end-phase, and dated. The installed prices these routes apply to are set out in our commercial HVAC cost guide, with ventilation plant covered separately in the air handling unit cost guide.
The £7,500 Boiler Upgrade Scheme is a flat grant towards air-source and ground-source heat pumps up to 45 kWth in homes and non-domestic buildings in England and Wales; it does not fund VRF, chillers or air handling units. Commercial HVAC is funded mainly through the tax system — the Annual Investment Allowance (100% on up to £1m a year) and, for companies, the 50% first-year allowance for special-rate assets — heating, ventilation and air-cooling plant is usually special-rate, so full expensing does not normally apply — plus Climate Change Levy relief where eligible. The Industrial Energy Transformation Fund, which served qualifying industrial sites, closed in July 2025.
Further reading: Capital allowances on commercial HVAC: what businesses can claim.
Guides on this topic
The schemes in detail
Annual Investment Allowance & first-year allowances (Capital Allowances)
Annual Investment Allowance: any business buying qualifying plant and machinery, with 100% relief on up to £1m a year. Companies can also claim a 50% first-year allowance on new special-rate plant, which includes most HVAC. Annual Investment Allowance: up to £1m of qualifying spend at 100%, for any business — sole traders, partnerships and companies alike. The 50% first-year allowance for special-rate assets (new, unused plant, companies only) sits alongside it, with the balance written down at 6% a year.
- Value
- Annual Investment Allowance: 100% relief on up to £1m a year, worth up to 25p of tax saved per £1 spent for companies at the 25% corporation-tax rate.
The primary commercial funding route for HVAC capital; the Boiler Upgrade Scheme covers only small heat pumps. The 50% first-year allowance is for companies only; sole traders and partnerships use the AIA. Ancillary works may fall under different rates. Always confirm treatment with your accountant, and note the Autumn Budget 2025 reduced the main writing-down allowance to 14% from April 2026.
Industrial Energy Transformation Fund (IETF) — closed July 2025
Industrial sites and data centres in England, Wales and Northern Ireland in eligible SIC codes (manufacturing, recovery/recycling, data centres) for fuel-switching (e.g. gas boilers to heat pumps) and energy-efficiency projects including waste-heat recovery. NOT for ordinary office air conditioning or comfort cooling.
- Value
- Historically 30-50% intervention, SME minimum grant £75,000; committed projects fully funded, but following the 2025 Spending Review no further IETF extension is planned and the second Phase 3 window will not take place.
Operated by DESNZ. The fund closed to new applications in July 2025 and no successor is planned, so treat it as ‘was available for eligible industrial sites’, not an open route. Only relevant to energy-intensive process/industrial buildings, not commercial comfort HVAC.
Climate Change Levy relief via a Climate Change Agreement (CCA)
Energy-intensive sectors that sign a Climate Change Agreement and meet efficiency targets receive large discounts on the Climate Change Levy: from 1 April 2026, 92% relief on electricity and 89% on gas. The main CCL rate from 1 April 2026 is 0.801p/kWh on both electricity and gas.
- Value
- Up to 92% CCL relief (electricity) / 89% (gas) for sites within a sector CCA scheme.
Not a grant for HVAC, but a running-cost lever worth flagging: efficient HVAC lowers energy use and therefore CCL exposure, and eligible sectors can cut the levy sharply via a CCA. Confirm sector eligibility and current scheme status on gov.uk.
0% VAT on qualifying energy-saving materials (until 31 March 2027)
A zero rate of VAT applies to the installation of qualifying energy-saving materials (heat pumps, solar, insulation, heating controls and more) in Great Britain until 31 March 2027, after which it reverts to 5%. Targeted at residential accommodation and qualifying charitable buildings, so it does NOT blanket-cover ordinary commercial premises.
- Value
- 0% VAT on qualifying installs until 31 March 2027 (then 5%).
The relief is residential/charity-focused, so it is relevant to mixed-use owners (the residential element), charity-occupied buildings and any residential portion, not standard commercial offices. Confirm scope on the gov.uk notice before relying on it for a specific building.
Boiler Upgrade Scheme (BUS), small heat pumps only
A flat grant towards air-source and ground-source heat pumps up to 45 kWth in homes and non-domestic buildings in England and Wales (Ofgem). It does not fund VRF, chillers or air handling units, and building-scale heat pumps sit above its size limit.
- Value
- £7,500 for air-source or ground-source heat pumps up to 45 kWth. Air-to-air heat pumps (£2,500) are residential only.
Included because facilities managers frequently ask about the £7,500 grant. Check eligibility with Ofgem before relying on it for a business building. The rest of commercial HVAC is funded through capital allowances (the Annual Investment Allowance and the 50% first-year allowance for special-rate plant), CCA relief where eligible, and (for qualifying industry) transformation funding.