HMRC cites EU tax laws as a reason for the VAT legislation. Credit: Zbynek Burival.

UK Government tax department HM Revenue and Customs (HMRC) has put forward legislation to increase the VAT rate for solar and battery storage from 5% to 20%.

This legislation was passed on 25 June 2019, the same day the UK House of Commons passed legislation to commit the UK to net-zero carbon emissions by 2050.

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The VAT hike on solar and battery storage is expected to come into effect from 1 October 2019. Home coal supplies will continue to receive the reduced VAT rate.

Citing EU tax laws that rule out lower VAT rates for energy-saving equipment, a HMRC spokesperson told Power Technology: “Under the current legal framework, there is no scope to apply a zero rate to energy-saving materials and, until negotiations on our departure from the EU are complete, our rights and obligations remain unchanged.”

Environmental groups criticised the decision, claiming the increased VAT rates will work against efforts to reduce carbon emissions in the UK.

Solar Trade Association chief executive Chris Hewett said: “It cannot be said loud enough; it is actions that we need to see from this Government to deliver on carbon targets. Today risks gifting us a tragic example of how policy is undermining the public’s ability to take positive climate action, even as politicians talk about it.

“We are bitterly disappointed to see secondary legislation racing head that risks increasing VAT for homes seeking to install battery storage alongside solar panels. We urge a considered debate on this panel, slow reflection and a better policy proposal.”

Renewable Energy Association chief executive Nina Skorupska said: “The VAT proposals will create a barrier to British homes and businesses who are seeking to take action on climate change and reduce their bills by installing solar with battery storage.

“With 84% of the public supporting renewable energy and a further 80% concerned about climate change, the Government should be doing all it can to install these technologies rather than enacting barriers.”

The HMRC spokesperson said: “The government is proposing changes that retain as much of the VAT relief as possible for energy-saving materials while ensuring compliance with EU law.”