Consultation on VAT increase for solar launched

The Government has launched a consultation on plans to increase VAT for solar PV and solar thermal hot water heating systems.

At present homeowners pay only 5% VAT when installing such items, but a EU Court ruled earlier this year that such measures cannot be considered a “renovation to a property” and should be subject to the full VAT level of 20%.

The HMRC has now launched a consultation on plans to increase VAT for these items, which will run until 3 February, 2016.

The proposal is for this change to come into force on 1 August 2016.

The Solar Trade Association estimates raising VAT for solar would add £900 to the cost of a typical 4kW solar installation on someone’s home, which is currently around £6,400.

“Instead of just accepting the EU ruling HMRC needs to push back and argue for solar to keep its reduced VAT rate,” said the Association’s Head of Policy, Mike Landy. 

“The Department of Energy and Climate Change and the Treasury also need to take this massive hike in end prices into consideration in their imminent decision on how far to cut the Feed-in Tariff for solar.”

“And we need the European Commission to move quickly to amend EU law so that all renewables and energy efficiency products are guaranteed a reduced rate of VAT. Brussels needs to remember that the EU doesn’t have many practical tools within its power to promote renewables, but rules on VAT is one of them,” he added.

A final decision on Feed-in Tariffs for solar is also expected shortly.

Jamie Hailstone is a freelance journalist and author, specializing in local government, transport and energy issues