HMRC is proposing fundamentally changing the way that the reduced-rate of VAT is applied to solar, as well as other household renewable technologies. Currently, the 5% reduced rate of VAT applies to installations of solar and combined installations of solar and storage as solar is listed under the energy-saving materials and heating equipment list. If implemented, HMRC’s complicated proposals will lead to the cost of an installation being charged at the full 20% VAT rate but only in circumstances where the cost of the materials exceeds 60% of the total cost of the installation. Installations typically consist of two elements – materials and labour, and solar has an exceptionally high requirement for skilled labour. Importantly most solar-only schemes will comfortably fall below the 60% threshold. However, the most cost effective collective purchase schemes, as well as more premium schemes such as those combined with more complex ‘smart’ technologies are at risk. There is also a significant risk to installations of solar and battery storage as the material costs will likely often be over the 60% threshold.
Solar Trade Association 10th May 2019 read more »