Trade bodies call for VAT cut on energy-saving products

A group of energy trade bodies is calling for the reinstatement of the 5 per cent rate of VAT on energy-saving materials and products.

In a letter to Chancellor, Rishi Sunak, the Association for Decentralised Energy, Regen and the Electricity Storage Network, Energy UK, the Renewable Energy Association, RenewableUK and the Solar Trade Association, say that the qualifying technologies should also be expanded to include storage, air-source heat pumps and EV charging equipment. The call comes in response to opposition to the increase last year of VAT on small-scale solar and storage systems.

In addition, the bodies are asking the Government to provide temporary tax relief as a means of boosting the industry, giving confidence to investors and allowing shovel-ready projects to immediately come forward.

As part of a green recovery the bodies believe that clean energy technologies could provide 3m job-years and add over £125bn to the economy. They are asking for temporary rates relief in order to jump start these projects, but also looking to longer term reform, to ensure clean technologies pay their fair share of rates.

Tax rates are regularly flagged as a barrier to deployment of clean technologies, particularly for assets that are installed behind the meter. The business rates and VAT structure for clean technologies is complex and widely recognised to be in need of reform to facilitate the transition to net zero. For example, supermarket chain Lidl recently installed solar PV across several of its sites, but faced a business rates increase of 530 per cent as a result.

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