Solar Batteries to Receive VAT Exemption
The landscape of sustainable energy in the United Kingdom is set for a positive transformation as the government announces a groundbreaking decision. Effective from February 1, 2024, retrofitted Battery Energy Storage Systems (BESS) will be granted a 20% Value Added Tax (VAT) exemption.
This move follows the precedent set in the Spring Statement of 2022, where energy-saving domestic equipment like heat pumps and roof-mounted solar were already enjoying VAT exemptions. Initially, BESS shared this privilege, but only when installed in conjunction with other energy-saving components such as solar panels.
In a significant turn of events on December 11th, the government broadened the scope of VAT exemption to include retrofitted BESS as well. This pivotal decision came in response to persistent calls from key industry players, including the Association for Renewable Energy & Clean Technology (REA) and Solar Energy UK. Interestingly, this expansion was not explicitly outlined in the initial Battery Strategy released on November 26th during the Autumn Statement.
The government’s decision was reached after a thorough consultation on the proposed expansion of VAT relief for energy-saving materials, as introduced in the 2022 Spring Statement. The conclusion was that retrofitted BESS independently meets the objectives for VAT relief. Consequently, electrical battery storage, whether retrofitted alongside qualifying energy-saving materials or installed as a standalone technology connected to the grid, now qualifies for VAT relief.
Calls For Even More Tax Exemptions
Dr. Nina Skorupska CBE, Chief Executive of the REA, welcomed the decision, acknowledging it as a long-standing request from the REA to align battery storage with other energy-saving materials. She emphasized the positive step taken in resolving the unequal tax treatment.
Skorupska further urged the government to extend VAT exemptions to include thermal storage and electric vehicle (EV) chargepoints, broadening the benefits of sustainable energy initiatives. Despite the extended wait for this decision, it is celebrated as a significant advancement for sustainable energy in the UK.
Chris Hewett, Chief Executive of Solar Energy UK, expressed gratitude for the news, underlining the potential for enhanced savings from home solar installations through the installation of a battery energy storage system. He sees retrofitting a BESS as a wise and timely decision for homeowners, particularly against the backdrop of the current energy price landscape. This move is poised to encourage more households to embrace sustainable energy solutions.
