Increased VAT on renewables is coming

Sadly the game will soon be over for Special Rate VAT on domestic renewable energy heating installations, but there may yet be some exceptions, which could make at least some people happy.

Following the ruling last year from the European Court of Justice that the UK government was acting outside EU VAT rules and the reduced 5% rate on the installation of domestic renewables was ‘unlawful’, we will soon have to toe the Euro line.

The 5% VAT rate has been a sweetener that’s boosted the uptake of renewables over the last year or so, and coupled with the generous incentives available under the domestic Renewable Heat Incentive scheme, this has helped make inroads to the UK’s challenging carbon reduction target.

Michael and Kate Wright of Yorkshire Heat Pumps

It’s expected the 20% VAT rate will return from 1st August 2016, so it’s not too late to benefit from this tax concession, as long as you are prepared to act quite quickly. We hear that for customers who have entered into a contract prior to this date, but whose installation may not yet be complete, then the reduced rate will still apply.

There is a consultation underway about these changes and we expect more formal announcements next month so cannot be certain of the details and timing of the change, but it is anticipated there may be some exceptions where the 5% rate will still apply.

Says Kate Wright: "This could be of real benefit to some of our ground source and air source heat pump and biomass boiler customers, as it’s been reported that the reduced 5% VAT rate could still apply if one of the following criteria is met:

  • The customer is over 60 years of age
  • The customer is on certain benefits
  • The building is used solely for certain relevant residential purposes or a relevant housing association.

We wait with bated breath for the announcement about what those benefits might be and on precisely what is a ‘relevant residential purpose’ and will report back when the detail is announced."

Meanwhile, here at Yorkshire Heat Pumps we will be happy to advise any prospective customers considering a switch to a renewable energy heating system, on the cost implications of this impending change. These additional costs can run into thousands of pounds on a larger installation, so it’s worth acting sooner rather than later to avoid the price-hike.

Comments (0)

Add a Comment

Allowed tags: <b><i><br>Add a new comment: