Government considering changes to VAT on solar battery storage

A letter from Energy Security and Net Zero Secretary, Grant Shapps to  the Environmental Audit Committee has been published, containing his responses to their findings which were published at the start of May.

The original report made the news by highlighting the huge delays many solar project faced in connecting to the grid (up to 15 years), but it raised other issues pertaining to the growth of solar power in the UK and expressed the view that action needed to be taken if the government were to reach their target of 70GW of solar capacity by 2035.

The chair of the committee, Philip Dunne, saiid: ‘Evidence to our committee made clear that the UK has the potential to fulfil the UK’s ambition of 70GW of generating capacity from solar. But sticking points for households around access to finance and VAT being slapped on batteries remain.’

In his letter, Grant Shapps referred to this, saying, ‘Regarding extension of the discount for battery storage, the VAT measure means that battery storage supplied as part of installation of a qualifying material will benefit from a VAT zero rate for the next 5 years. Battery storage has not been added to the list of qualifying materials itself and therefore will continue to be standard rated when installed as a standalone product.

‘However, His Majesty’s Treasury (HMT) recently launched a Call For Evidence to consider changes to the energy saving materials list: VAT energy saving materials relief – improving energy efficiency and reducing carbon emissions. We encourage you to share any evidence you may hold with HMT as to why storage should be included by 31 May 2023. ‘

He did, however, resist the idea that solar panels should be installed in all new housing: ‘In December 2021 the Government introduced an uplift in energy efficiency standards… We expect that in order to comply with the uplift, most developers will choose to install solar panels on new homes or use other low-carbon technology such as a heat pumps.’

Environmental Audit Committee Chairman,  Philip Dunne, said of Shapps’ comments: ‘The issue of VAT on batteries being installed after solar panels is an issue that has been raised multiple times within our Committee’s work. I am therefore very pleased that this is being considered in the Government’s consultation on VAT on energy saving materials, and the Committee will be making representations to the Chancellor of the Exchequer to highlight the evidence we have taken on this issue.’