400% VAT Increase

VAT Increase Avoided by Solar Industry

The UK solar industry has narrowly missed a 400% VAT increase this year.

Last June the EU Commission claimed that the 5% cap on VAT for solar energy products was illegal, and breached their EU VAT directive. They advised Her Majesty’s Revenue & Customs on an increase to 20% VAT on the renewable energy industry. This included Solar Powered energy and Wind Turbine energy throughout the UK. If this was to happen, it could have potentially squashed the industry in a matter of years, making way for dead-end fossil fuels yet again. The EU Commission also suggested a complete overhaul and reboot of the way VAT is decided in the UK, to fit in with the rest of the EU countries. This would see families or individuals in the UK, who seek to make the swap to renewable solar energy, have to pay up to £1000 per household to install the panels. As well as this, the VAT increase would have seen an enormous 18 000 jobs at risk due to cuts throughout UK Solar companies and installers. Following this statement last year from the EU commission, Her Majesty’s Revenue & Customs released plans last December to rise the percentage of tax on the solar industry to 20% in August 2016. The rise was met with outrage from the public and renewable energy companies combined.

Following this statement from Her Majesty’s Revenue & Customs, George Osbourne’s 2016 budget seemed to avoid the subject almost entirely. The 400% VAT Increasesilence on Solar Power was welcomed by Paul Barwell, the CEO of the Solar Trade Association, who said that “No VAT news is good news on Budget day“. However, it led to a lot of confusion for the UK public, who were then unsure on how much renewable energy would cost them in their future investments. Osbourne discussed a VAT rise on tax for renewable energy generators, as well as subsidies planned for fossil fuels including gas, nuclear energy and diesel. Surely the tax relief for fossil fuels, in itself, would have put a squeeze on many renewable energy options…

In response to this, the government this week has discussed that they will not oppose any plans to amend the increase to the VAT on Solar Energy. Leonie Greene, Head of External Affairs at the Solar Trade Association stated that this amendment would be encouraging for renewable energy. She went on to say that “Increasing VAT on solar to 20% while retaining 5% for grid electricity, gas and oil defies all logic, which is why the STA has consistently taken a strong line on this issue. The Chancellor can and should stand up to Brussels on this – lower VAT on domestic solar is within the guidelines set out in EU law.”  

The amendment to the increase this week has been very much welcomed by the renewable energy industry. With Greene thanking the MP’s of all parties who helped her rally against the VAT hike. She also thanked them for making solar energy a priority, in favor of the dead-end energy resources that seemed to be taking the favor in George Osbourne’s budget this year. The VAT on solar energy will be reviewed in 2017, in which time Solar companies hope to improve savings on power. In the meantime, you can contact the VAT helpline if you have any queries about VAT in the UK.