Concerns over VAT hike on renewables

Julia Evans, chief executive, BSRIA
Julia Evans, chief executive, BSRIA
The Building Services Research and Information Association (BSRIA) is concerned about the possible outcome of a government consultation in which a proposed 15% VAT hike for domestic solar panels and other renewable energy products could happen after falling foul of EU rules. The consultation closed on 3rd February, with the changes set to come into effect on 1st August, if approved.

The European Court of Justice ruled in June last year that Britain’s longstanding 5% rate on the supply and installation of energy saving products breached its VAT directive, which only allows energy saving products to use a reduced rate in social housing projects, or as part of a social policy.

To comply with the rules, HMRC launched a consultation on proposals which will see products such as insulation and wood-fuelled boilers remain at the reduced 5% rate, but will mean renewable energy products such as rooftop solar panels and wind turbines will have to move back to the standard 20% rate.

Julia Evans, chief executive, BSRIA, said: “Once again this is bad news for the renewable energy and energy efficiency market, if the proposal is successful. Yet again, the energy efficiency industry is to suffer at the hands of this decision which flies in the face of the industry trying to achieve its climate change targets and build on energy-saving measures. The key issue here is about the various energy definitions and what falls into which VAT section.

“More and more, BSRIA is getting the impression that energy and carbon reduction issues are being viewed as a burden to government which is inhibiting, not only the industry, but the economy at large.”