If you are one of those people who tend to have falling asleep syndrome when tax is mentioned, you may have very little interest in whether VAT is charged on your domestic wind turbine system. However it is worth taking note, because you may discover that you can save VAT in certain circumstances and this may make the installation even cheaper.
Wind turbine installation VAT
If a wind turbine is installed into a residential home (and often onto charitable businesses) it is subject to just 5% VAT rather than the usual rate of 20% for goods and services. This is quite different to what a business would have to pay.
This 5% rate applies only to installations carried out as a full job and not when the items are bought separately and installed individually. In other words you should employ a company to both supply the product and install it to take advantage of this reduced rate.
Wind turbine income VAT
When it comes to paying VAT on the income received from your wind turbine, you will only need to pay this if you are considered to be a business and are VAT registered. This may include property investors who make money from domestic properties (ie landlords). In this case it is just 5% for the Export Tariff or the energy sent to the grid. The FiT income does not need to have VAT paid on it by anyone.
So the main points to bear in mind are the following:
To benefit from the 5% VAT rate you need to have your wind turbine installed as a supply and fit project – not bought individually as this will be at a 20% rate.
The feed-in-tariff is not subject to VAT or any tax for homeowners. Businesses will need to pay 5% VAT on the energy they sell back to the grid, but domestic installation will not pay this at all. Remember to have all installations carried out under the Microgeneration Certification Scheme to benefit from the tax relief and tariffs.