Government must not change VAT on solar panels from 5% to 20%, campaigners urge

One of the UK’s largest renewable energy suppliers has written to the Chancellor to warn that plans to change VAT from 5% to 20% for families buying solar panels and renewable technology could harm the country’s push for a net zero carbon economy by 2050.

Juliet Davenport, chief executive and founder of Good Energy – which has around 250,000 customers, called on Sajid Javid to scrap the plans, which come into effect on October 1.

She wrote: “There are more than one million solar PV installations now in operation across the UK.

Juliet Davenport, CEO Good Energy
Juliet Davenport, founder and chief executive of Good Energy, is urging the Government to reconsider charging people more for solar panels (Good Energy / PA)

“Their sum capacity totals more than our single biggest power station. This has grown from near-zero within 10 years, showing what can be achieved when we encourage people to be part of the solution to climate change. We need to ensure that this momentum is not lost.

“Consequently, this government must not support the proposed VAT increase to 20% on clean energy solutions for households, including solar and storage, whilst it remains at 5% for coal and gas.”

The letter also has the support of Nina Skorupska, chief executive of the Renewable Energy Association; Alice Bell of 10:10 Climate Action and Aaron Kiely, climate campaign lead at Friends of the Earth.

A petition on the issue has received more than 17,000 signatures.

Current rules mean anyone buying solar panels or other electricity storage for their homes are charged 5% VAT, but an EU ruling in 2015 said the UK Government must charge the full 20%.

Negotiations led to the Government and EU agreeing that the 20% level only needs to be charged for technology over a certain threshold, but Good Energy warn this could stifle innovation.

Kit Dixon, Good Energy’s regulatory affairs officer, explained: “It penalises people who want to use the best technology. If you have panels and a battery installed in your home or business you’ll almost certainly be above that threshold.

“The energy system is changing and more homeowners and businesses do want to invest in this kind of technology and it is vital we see an uptake from this tech.”

He added that last month’s blackout across large parts of the country could be avoided in the future if more households generated their own electricity and relied less on the national grid.

The calls to scrap the planned VAT rise also comes months after data showed the Government’s decision to scrap subsidies for homes with solar panels has led to a 94% fall in new installations.

Labour accused the Government of “actively dismantling” the solar power industry, whist still agreeing to huge subsidies for new nuclear power stations.

The Treasury was approached for comment, but said it was a matter for HMRC.

An HMRC spokesperson said: “The Government is committed to greening our economy and designed the changes for energy-saving materials to retain as much of the VAT relief as possible for UK households, while complying with EU law.

“While the UK remains a member of the EU, the Government is obliged to make these changes which were approved by Parliament on 25 June and will take effect from 1 October 2019. As all taxes are kept under review, it may be possible to amend these rules once the UK has left the EU.”

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