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Major win in sight on domestic solar VAT

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Last December HMRC proposed to hike VAT on domestic solar PV and solar thermal from 5% to 20% adding £900 to the cost of a typical PV install and £700 to thermal.

We at the Solar Trade Association responded in the strongest terms, arguing within Government that this was both unnecessary and illogical. Unnecessary because after careful examination of the ECJ judgment and EU rules the UK could, in our view, continue to apply low rates of VAT on solar. Illogical because it would have led to a situation where solar was going to be taxed at 20% when grid electricity, gas and oil would be only pay 5%. We engaged with the key civil servants, wrote to the Ministers concerned and mobilised MPs to take action.

Here is the situation as we understand it:

  • The Prime Minister told the House of Commons earlier this afternoon that the Government will be accepting a cross-party amendment tonight which empowers the Chancellor to set low rates of VAT for solar and other energy saving materials. This echoes a statement from a No10 spokesperson this morning.
  • Last Friday the Treasury issued a statement that solar would continue to benefit from low rates of VAT.
  • EU heads of Government have agreed to reform EU VAT rules to allow national governments more freedom in setting reduced rates of VAT.

We know there is more work to be done – in our press statement we have called for the change to be set in stone in the Finance Bill later this year and for a detailed statement from the Treasury setting out the Government’s intention with regards the HMRC consultation.

This is by no means final, and we are being cautious in how we welcome it. But we wanted to say thank you to those of you who responded to our call last Friday and emailed your MPs to back the amendment – it looks like it may have worked.

STA Article, 22 March 2016

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