The short answer to this question is no – however if you are installing solar panels on a domestic building you will only need to pay 5% VAT rather than the usual 20%. However, as with any tax law, there are some very important things to remember.
- Your solar panel installer will need to be installed by a professional who is registered under the Microgeneration Certification Scheme to qualify for the lower VAT rate. If you do a DIY install, you will need to pay the full VAT rate when you buy your panels.
- The installer should charge you the lower VAT rate on their materials, the solar panels and their installation costs.
- If work needs to be done on your roof to allow it to bear the load of the solar panels, this would also attract the lower VAT rate. However this does not apply if they are being installed as part of an extension or other building work.
- If you are building a new home and the panels are installed as part of the building process – you will be exempt from VAT entirely.
- If you can get a tariff via the Renewable Heat Incentive from the government for your installation, a wider range of materials will fall into the lower VAT bracket. Note: this only applies to solar thermal installations.
- The lower rate of VAT only applies to domestic buildings.
- If you run a business from your home you will be able to claim the VAT back for your installation (although not all of it). However you can only claim 5% even if 20% has been charged. You need to be very careful to check your paperwork to ensure the correct rate has been charged.
Tax on the FIT
Domestic solar panel installations which receive the feed in tariff are not subject to tax, however you may need to pay a proportion if you use your home as a business. The feed in tariff is seen as income for a business.
The government has been having an ongoing argument with the EU regarding the 5% VAT rule for renewable energy materials. The EU does not agree that solar panels (and other renewable products) should be charged a lower rate of tax. Our government is so far, standing their ground and the rate has remained. However, there is a a chance that the VAT may change in the future.