VAT relief expanded to all battery storage systems

All battery storage systems have been exempted from VAT, enabling more than a million homes to benefit from a rebate, the Treasury has announced.

Chancellor of the exchequer Jeremy Hunt announced in March’s Budget a consultation on an expansion of the government’s VAT existing relief scheme for energy saving materials (ESMs).

In his response to the consultation, Treasury financial secretary Nigel Huddleston MP said the existing relief on batteries installed with new solar panels will be extended.

This will allow battery storage systems to qualify for VAT relief when retrofitted to existing solar panels as well as water and wind turbines.

The relief, which will cut the cost of battery storage by 20%, is also being extended to grid-connected batteries installed on a standalone basis

The response says: “The government hopes this reform will enable more consumers to retrofit electrical battery storage to existing ESMs, allowing households to maximise the efficiency of their solar panels, wind turbines, and water turbines.”

Solar Energy UK has calculated that more than a million homes, which already had solar panels installed before the scheme’s introduction, could benefit from the extended rebate.

The response also says the government is extending VAT relief on all groundworks associated with ground- and water-source heat pumps such as the digging of trenches and drilling of boreholes for arrays.

The extensions of VAT relief are due to come into force on 1 February.

Introduced in the previous year, the existing VAT relief covers a number of ESMs, including heat pumps and insulation, and has been credited with fuelling the boom in rooftop solar installations seen this year.

The MCS Foundation, which pushed for extension of the VAT relief ahead of last month’s Autumn Statement by the chancellor, said the move could lead to much greater uptake of batteries.

David Cowdrey, director of external affairs at the MCS Foundation, said: “It is wonderful news that the remaining anomalies in the zero-rating of VAT, that exclude some battery storage installations and work needed for ground source heat pumps, have been addressed.

“By zero-rating VAT on these products, the Treasury has massively boosted the domestic renewables sector and help households reduce bills and cut carbon with home-grown energy.”