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Solar savvy householders could reclaim VAT

25th October 2013 Print

Homeowners who have installed solar panels could be set for a windfall thanks to a new European Court ruling.

The EU Court of Justice recently ruled that an Austrian homeowner could claim back VAT on solar panels he had installed at his home. Thanks to this ruling it means that homeowners here in the UK could soon be able to reclaim VAT on domestic solar panels.

However, not everyone is happy about this development, especially the UK government, as the ruling could open the flood gates to an estimated 250,000 UK households with solar installations claiming back over £150 million in VAT.

Having only introduced their Green Deal initiative last year, which provides subsidiaries for green energy installations, the decision by the EU in this case could significantly undermine the government’s funding on solar energy.

Brent Goodwin, VAT Manager at Chartered Accountants Newby Castleman, sheds some light on the new development:

“The Court of Justice ruling found that the operation of solar equipment to sell back electricity to an energy network counts as an economic activity, meaning the owner could claim back the VAT on the cost of the initial system purchase. Such a ruling could mean big incentives for home owners looking to install solar panels, but implications for HMRC both due to the potential cost, but also the administrative burden of processing thousands of VAT registrations.

Having said this it is still all very much up in the air when it comes to how the UK government will react and handle this decision. The verdict of this case also comes at a time when the EU is also trying to force the UK government to raise its reduced VAT rate on solar equipment from 5% to 20% and this ruling has thrown another complication in the government’s strategy on household renewables.

On such an issue, homeowners looking to claim back any money on green energy installations should seek professional advice first before acting.”

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