The UK government has agreed to a tax break for residential battery storage systems but systems must be installed with solar panels.
The Solar Trade Association (STA) says it has secured a 5% rate of VAT on battery storage instead of the current standard 20% currently. However, HMRC (the UK's revenues and customs agency) will only grant the lower rate if the battery is sold and installed alongside solar, which already benefits from the lower rate. If the batteries are sold separately and retrofitted to existing solar systems, the tax break will not apply.
Battery suppliers and retailers are already offering their systems as part of a package deal with solar, including companies such as Moixa, E.On and most recently IKEA which now sell batteries alongside panels from Solarcentury. To account for the 5% rate, packages may come down in price.
Seb Berry, STA vice chair and head of external affairs at Solarcentury said: “Reduced VAT on new systems will encourage homeowners to embrace storage technologies alongside solar. Solar remains a good investment and storage means householders can now take even greater control of their energy bills. All STA members will be delighted by this win.”
Other batteries sold purely as retrofit products would remain on the 20% rate and at a disadvantage. However, it is likely that installers will begin to push sales of storage with solar panels to take advantage of the reduced rate, while homeowners already with solar and looking to install energy storage will miss out on the VAT cut.
However, the STA has said it will continue its discussions with HMRC on the issue of reducing VAT on all battery storage units, including those for retrofit.
Says Berry: “The policy wins are needed as solar deployment has fallen to a seven-year low. The industry is struggling with a policy framework that now provides tax breaks for fossil fuels that are not applied to solar.”
The news comes as the government recently launched the first phase of a £246m battery storage challenge and set out plans with Ofgem to encourage consumers to generate, store and use their own energy.