Wednesday, June 19, 2024
NewsPowering Your Home

Zero-rating VAT for home renewable energy storage starts today

Home energy storage systems are now zero-rated for VAT, as new rules come into effect designed to boost the uptake of the clean energy technology among homeowners.

In December last year, the government announced standalone battery storage installations would be subject to a zero per cent VAT rate from 1 February of this year until at least 1 April 2027.

The technology joins a growing list of “energy saving materials” that have been granted VAT relief until 2027 in a bid to reduce the upfront costs of solutions and technologies that can decarbonise buildings. Draught stripping, insulation, solar panels, ground source heat pumps, and air source heat pumps are all already zero rates for VAT.

But previously, only battery storage systems installed at the same time as solar panels could benefit from the discount.

Water-source heat pumps and diverters retrofitted to energy saving materials, such as solar panels and wind turbines, have also this morning joined the list of products eligible for the zero VAT rate, alongside the borehole drilling works necessary for installing ground-source heat pumps.

The changes were welcomed by domestic renewables accreditor MCS Foundation, which said they would support the continued growth of the renewables sector.

“Battery storage will play a vital role in reducing bills and decarbonising our homes,” said David Cowdrey, director of external affairs at the MCS Foundation. “The zero-rating of VAT which comes into effect today will support more households to install batteries and is a positive step forward.

Cowdrey urged the government to keep renewable technologies subject to zero per cent VAT until the end of the decade. “In order to ensure continued growth in renewables being installed in UK homes, the Treasury should be planning to extend the zero-rating of VAT until 2030 to really support these new renewable businesses,” he said.

Recent figures published by MCS Foundation reveal the battery storage sector saw strong growth in 2023, with annual installations increasing 1,700 per cent year-on-year, albeit from a low base.

Bean Beanland, director of growth and external affairs at the Heat Pump Federation, said the elimination of VAT on heat pumps would help contribute to the decarbonisation of heat.

“Homeowners can now invest in ground- and water-source heat pumps safe in the knowledge that the zero-rate VAT benefit extends equally to all heat pump technologies,” he said.

In addition, the clarifications contained in the revised VAT Notice 708/6 will allow heat pump contractors to apply best practices with respect to lowering system flow temperatures, in the full understanding that emitter upgrades of all types can be included in concessionary contracts.

“This package is one more element in the raft of supportive policy initiatives that are required to drive forward the decarbonisation of domestic heat as a very significant contributor to the UK’s net zero aspirations,” the document stated.