Solar industry seeks clarity on VAT rate

The European Commission has published an Action Plan on VAT. The solar industry hopes that it will support Ministers to apply a reduced rate of VAT of 5% on solar PV and solar thermal panels.

The European Commission is expected to give national Governments more autonomy in the grant of lower rates of VAT. The EU has proposed to routes to achieving this The first is through a broader EU-wide list of products on which the reduced rates can apply. The second is to give national governments the power to set their own reduced rates of VAT within general guidelines.

Leonie Greene, Head of External Affairs for the STA commented:

“The domestic solar market is undergoing challenging adjustments and both the industry and householders need to know that there will be no unfair increase in solar VAT. What we need now is a clear statement from Treasury to confirm the industry can count on the positive statements already given by Ministers.” “It would be a nonsense to impose VAT on solar at 20% while retaining 5% for grid electricity, gas and oil. The EU decision today shows a clear intention to increase flexibility for member states on VAT decisions. Post the Paris Climate Agreement, the political priorities the EU says will inform the new VAT regime will surely include the need to rapidly de-carbonise our energy supply.” The Solar Trade Association has called for the Government to reconsider. They state that an increase in VAT from 5% to 20% would add £900 to the cost of the typical solar PV installation.