VAT News

HMRC Announce Unpopular Proposal to Significantly Increase VAT On Solar Panels

The UK Treasury, HMRC, have put forward legislation to increase VAT for home solar-power systems from 5% to 20%, ironically on the same day that MPs have been debating the government’s new net zero carbon target for 2050.

Households hoping to reduce their carbon footprints through the use of solar panels (and batteries) will face a steep VAT increase from October 2019. What has made this proposal even more unpopular, is that home coal supplies will continue to enjoy the lower VAT rate.

HMRC has pointed to EU tax laws for the planned increase because they rule out lower VAT rates for energy saving equipment under state aid rules.

The Renewable Energy Association (REA) has called for HMRC to cancel the latest increase, which would come into effect as the UK prepares to leave the EU adding the rise “contradicts the government’s commitment to tackling climate change” only weeks after parliament declared a climate emergency.

The 5% VAT rate will still be allowed for housing associations and buyers who are over the age of 60, and the lower rate will also apply to the labour costs associated with installing solar panel systems, while the 20% rate will be applied to the hardware only.

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