HMRC has confirmed its intention to roll-out a significant increase on the rate of VAT paid on solar panels and wind turbines from 1st August 2016. The increase results from the removal of value added tax relief previously attached to such renewables. The level of VAT on solar panels and wind turbines will jump from 5% to a 20% rate. HMRC is blaming this significant rise on an European commission ruling covering energy saving materials used in the construction trade.
An EU court ruling found that the reduced, 5% VAT rate the UK Government had attached to ‘energy saving materials’ violated the Union’s VAT directive as they could not be considered a property renovation.
On 9th December HMRC issued a consultation document “Changes to the reduced rate of VAT for Energy Saving Materials” which sets out that it intends to carve out solar panels – as well as domestic-scale wind and hydro turbines – from the relief, effectively increasing the cost of a standard installation.
It’s been estimated by trade organisations that the move will add around £900 to the cost of an average 4kW installation which may put property owners off of pursuing installation of renewable energy sources.
Property owners considering installation of renewable technologies such as solar panels or wind turbines are advised to ensure they do so prior to August next year if they want to avoid an overall increase in the cost.
You can read more of our blogs on the subject of VAT here.
