HMRC agrees 5% VAT on batteries sold with a new solar system

Her Majesty’s Revenue and Customs (HMRC) department is set to place just a 5 per cent VAT rate on batteries that are sold with new solar PV systems, following close discussions with the Solar Trade Association (STA).

HMRC had previously considered that all storage in the U.K. should be banded in the 20 per cent VAT range. However the STA’s argument - that batteries, when purchased as part of a solar package, should be brought in line with the treatment of household fuels, grid energy supply and other onsite technologies – was received positively by government.

After a meeting between HMRC and STA representatives, the STA provided evidence to justify why battery storage should attract that reduced rate when installed alongside a PV system.

“Reduced VAT on new systems will encourage homeowners to embrace storage technologies alongside solar,” said Seb Berry, STA’s vice chair and head of external affairs at Solarcentury.

“Solar remains a good investment and storage means householders can now take even greater control of their energy bills.”

It is believed that, with just 5 per cent VAT, home batteries are now a more viable option for would-be solar customers in the U.K. This triumph for the industry comes at a time when solar deployment rates in the country are at a seven-year low following a series of swingeing cuts to subsidy and support.

The STA’s head of external affairs, Leonie Greene, added: “This policy win comes as BEIS releases its latest public opinion tracker on energy showing solar retains its top spot as the nation’s energy sweetheart at a massive 86 per cent of the public supporting the technology.”

The STA has pledged to continue engaging with HMRC to convince it to lower the VAT rate for all storage technologies, whether purchased alongside solar, or not.

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