Government Move To Keep Low VAT On Residential Solar "very Encouraging"

The Solar Trade Association has greeted reports of a change of direction on VAT on solar as "very encouraging".

HMRC proposed in December of last year to hike VAT on domestic solar PV and solar thermal installations from 5 percent to 20 percent ^[1], following a European Court of Justice ruling that the UK's rules on VAT on energy weren't in line with EU law.

However the Government issued a statement [^2] last Friday stating that solar would continue to benefit from low rates of VAT.

An amendment to the budget resolution ^[3] which empowers Treasury to give solar and other energy materials lower rates of VAT has gained cross-party support is due to be agreed in the House of Commons (Tuesday 22 March) - and the Government stated earlier today that it would not oppose the move. MPs of all parties, Labour and Conservative, have added their names to the amendment.

Leonie Greene, Head of External Affairs at the Solar Trade Association:

"The signals coming from Government appear to be very encouraging."

"Increasing VAT on solar to 20 percent while retaining 5 percent for grid electricity, gas and oil defies all logic, which is why the STA has consistently taken a strong line on this issue. The Chancellor can and should stand up to Brussels on this "“ lower VAT on domestic solar is within the guidelines set out in EU law."

"We hope that Treasury will issue an official statement confirming the Government's intention as soon as possible, as HMRC is still in theory considering responses to the consultation on this."

"We also want to see the reduced solar rate of VAT in black and white in the Finance Bill later this year. What prospective solar homeowners and the industry needs more than ever is certainty "“ we need to know for sure."

"The solar industry owes a big thank you to the MPs of all parties who rallied in support of solar over the last week and put their name to the amendment."

The Solar Trade Association has estimated that an increase in VAT from 5 percent to 20 percent would add £900 to the cost of a typical residential solar PV installation and has been pushing for the Government to reconsider its proposal since last December when the consultation was launched. ^[4]