HMRC proposed in December of last year to hike VAT on domestic solar PV and solar thermal installations from 5% to 20% following a European Court of Justice ruling that the UK’s rules on VAT on energy were not in line with EU law.
However, an amendment to the budget resolution – which empowers the Treasury to give solar and other energy materials lower rates of VAT – has gained cross-party support.
It is due to be agreed in the House of Commons tomorrow (22 March) – and the Government stated earlier today that it would not oppose the move.
MPs of all parties, Labour and Conservative, have added their names to the amendment.
A spokesman at the Solar Trade Association said: “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.”
“We also want to see the reduced solar rate of VAT in black and white in the Finance Bill later this year. What prospective solar homeowners and the industry needs more than ever is certainty – we need to know for sure.”
The Solar Trade Association estimated that an increase in VAT from 5% to 20% would add £900 to the cost of a typical residential solar PV installation and has been pushing for the Government to reconsider its proposal since last December when the consultation was launched.