UK Set to Hike VAT on Solar Power

December 11, 2015 Taxation in UK

LONDON – Unless the UK government fights back against a EU court decision, the cost of solar power installations in the country could rice significantly.

In a statement issued on December 9th the Solar Trade Association of the UK called on the government to maintain the tax break currently provided to the installation of solar power generators and solar water heaters in private homes.

Currently the VAT rate applied to the sale of solar power and water heating systems is set at 5 percent, down from the standard rate of 20 percent.

However, the EU court has recently ruled that the beneficial rate does not comply with EU regulations, as the installations of power systems does not count as “renovation to a property” and therefore not eligible for such tax breaks.

The Association called on the government to not accept the decision but to place extra pressure on the court in defence of the tax breaks prior to the final decision of the court, which is due later this year, or January 2016 at the latest.

If the tax break is dropped then the installation of a standard 4kW could go up in price by as much as GBP 900 from the current price of approximately GBP 6 400.

Photo By: Wayne National Forest