The Chartered Institute of Taxation (CIOT) is alerting home owners that the cost of VAT on most solar panel installations, and all wind and water turbines, will go up from the start of October.
The UK has a reduced rate of five per cent VAT for the installation of energy-saving materials in residential accommodation. However, the UK government is amending the scope of this after the Court of Justice of the European Union ruled that the scope of the reduced rate was too wide and that the standard rate of 20 per cent should apply in some cases.
However, the EU VAT rules allow the reduced rate of VAT to continue to apply to the installation of energy saving materials, including the materials themselves, whatever the cost of the materials, in housing where it is installed as part of social policy – for those meeting the relevant criteria.4
“The cost of installing solar panels is usually 80-90 per cent materials and the remainder the cost of installation services. Therefore, if the buyer cannot meet the social policy conditions, from 1 October 2019, they will suffer a 15 per cent increase in the VAT on the panels themselves, unless they have signed a contract for installation prior to that date. For an installation currently costing £6,000 – £7,000 including materials, the change in VAT rate will increase the price by approximately £700 -£800.”Alan McLintock, Chair of CIOT’s Indirect Taxes Sub-committee