HM Revenue and Customs (HMRC) has confirmed that a 5% rather than 20% VAT will be applied on residential battery storage installations when paired with new solar PV systems.
Currently, the 5% rate will only be applicable to a single indivisible supply and installation of solar panels with a battery in residential accommodation, where the battery is ancillary to the solar panels. The Solar Trade Association said it would continue to argue for a 5% rate for all household battery storage installations.
The association’s head of external affairs, Seb Barry, said: “Reduced VAT on new systems will encourage homeowners to embrace storage technologies alongside solar. Solar remains a good investment and storage means householders can now take even greater control of their energy bills.”
He added: “The policy wins are needed as solar deployment has fallen to a seven year low. The industry is struggling with a policy framework that now provides tax breaks for fossil fuels that are not applied to solar.”
Matthew Hodkin, tax partner in the renewables team at law firm, Norton Rose Fulbright, said: “This would be a significant step towards encouraging innovation and development in residential solar and storage solutions and will ultimately improve their economics as homeowners, unlike businesses, cannot recover VAT on the cost of the storage. Battery storage will have a key role in the continued evolution of the energy sector and this is a further signal that the UK sees itself to be at the forefront of these developments.”
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