VAT on domestic solar installations – what you need to know

VAT on domestic solar installations – what you need to know

There’s a lot in the media at the moment changes to VAT on solar panels from 1 October 2019. Much of this is lazy journalistic scaremongering and most installations are not affected. Here are some simple facts:

  • VAT is still charged at 5% on all domestic solar PV system installations where the labour charges make up 40% or more of the total cost. This is the case for the majority of installations.
  • VAT on some solar installations which include a battery will be charged at 5% if the above qualification is satisfied, or for qualifying persons* if certain social policy conditions are met. Larger batteries may require the job to be split into two invoices, one at 5% VAT for the PV and one at 20% VAT for the battery.
  • VAT isn’t and has NEVER been the reduced 5% rate for non-domestic installations, i.e. businesses, community organisations and charities.
  • VAT on repairs to solar installations is and always has been 20%.
  • VAT on retrofit battery installations is and always has been 20%.

*A qualifying person is defined in legislation as a person who is aged 60 or over, or is in receipt of one of the following benefits:

  • Child Tax Credit (other than the family element)
  • Council Tax Benefit
  • Disability Living Allowance
  • Disablement Pension
  • Housing Benefit
  • Income-based Jobseeker’s Allowance
  • Income Support
  • War Disablement Pension
  • Working Tax Credit

You can read the rules “from the horse’s mouth” here: Energy-saving materials and heating equipment (VAT Notice 708/6)

RED Electrical will always charge the correct rate of VAT for our installations. Installers that don’t comply with the above HMRC requirements risk having to pay the difference in VAT paid and potentially financial penalties.

If you find an installer that is charging VAT at the wrong rate and think it’s a quick win for you then consider what will happen to that installer in the event of a VAT audit. Many would be asked to pay the shortfall and be forced out of business. Now consider what your warranty is worth in that eventuality.

Let’s do it properly.