MCS has joined forces with several industry players in a campaign calling for the reversal of a proposal from HMRC to increase VAT on some energy saving materials.
HMRC is proposing fundamental changes to the way that the reduced rate of VAT is applied to solar, as well as other household renewable technologies. Currently, the 5% reduced rate of VAT applies to installations of solar and combined installations of solar and storage.
The open letter, penned by The Solar Trade Association has also received backing from Regen, SEA, ADE, HPA and BEAMA. It was issued to Finance Secretary Mel Stride and Energy Minister Claire Perry as a month-long consultation launched by HM Revenue & Customs, closed on 3 May.
It has proposed an increase in the VAT attached to some energy saving materials from 5% to 20%. If implemented, these complicated proposals will lead to the cost of an installation being charged at the full 20% VAT rate in circumstances where the cost of the materials exceeds 60% of the total cost of the installation.
MCS is a nationally recognised quality assurance scheme, which provides the framework for the certification of low carbon technologies. Ian Rippin, CEO of MCS said: “The VAT hike on materials for solar panels and also battery storage from 5% to 20% will impact on many domestic installations. It raises questions over the economics as it will make it more expensive for households to make a positive step change by installing low carbon technologies to reduce their carbon footprint. At a time when we are actively encouraging the uptake of these technologies to meet government targets around the decarbonisation of homes and businesses in the UK, this change will just further slow deployment.”
He added, “This VAT rise is linked to the UK having to comply with an EU regulation. Our installers, which includes many small, independent companies have been battered over the last few months, having to navigate an increasingly difficult landscape due to failings in policy and Government support. In just a few short months, we’ve seen the removal of the feed-in tariff, a void around the smart export guarantee and now this VAT proposal. I implore a seriously considered review of this.”
Although parliament declared a climate emergency earlier this month, rates for fossil fuels including gas and coal will remain at 5%, while materials for some renewables will see tax rises of 15%.
If approved, these rates will apply from 1 October.
View the Open Letter here