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VAT clarity for solar & storage

Posted: 4 August, 2017. Written by Lorraine

HMRC has finally provided clarity that batteries sold alongside new solar PV system will most likely be eligible for the reduced VAT rate.

In an announcement from the Solar Trade Association ('the STA') they have stated that they have a received an answer from HMRC on the VAT point...

The scope of the reduced rate set out in the VAT Act 1994, Schedule 7A, Group 2, Items 1 and 2 is very tightly drawn. It is only applicable to the supply and installation (as a single supply) of certain specified materials whose primary purpose is energy saving, in residential accommodation. These products are listed in the VAT Act 1994, Schedule 7A, Group 2, Legal Note 1(a) to 1(k). Solar panels are listed as an energy saving material in note 1(e).

If there is a single indivisible supply of a battery for the storage of power generated from the solar panels, which is supplied and installed at the same time and in conjunction with qualifying solar panels we would consider this to be a single reduced rate supply. This is on the understanding the battery is linked to the solar panels and ancillary to the supply of the solar panels. We would expect the aim to be one of maximising use of on-site solar power consumption.

If batteries are sold separately and retrofitted to existing solar systems then this would most likely  ust the standard VAT rate.

The RECC Executive woud advise installers that where it is still unclear they should check with HMRC on what rate of VAT to use.