Is your Domestic Solar Panel Installation actually a little Electricity Power Plant earning income from the Feed-in-Tariff?

This could be a really important question.

For those of us with lofty ambitions, we could think of our solar domestic PV installation as a little power plant. You might start to think that if you’re effectively a little business generating power, that registering for VAT is then a logical next step. This could save you all the VAT on your solar panels and the cost of installing them.

House with Solar Panels - Power Plant

Houses with Solar Panels – A Power Plant!

OK, you won’t be saving too much because the VAT rate on solar panels is 5%, but if you have a large domestic installation this could potentially become an attractive option.

Back in the real world this is not something that is currently “allowed” here in the Britain, however last week the EU courts of Justice ruled that this is exactly what a man in Austria could do. While we all love a windfall, it is pretty unlikely to happen here, at least for some time. There are a number of reasons for this:

  • If this went ahead, HMRC will be swamped by the masses of small businesses registering, so they’ll be keen to avoid it.
  • The government is already fighting the EU for the UK’s right to keep its reduced VAT rate (of 5%) on energy saving materials as it breaches EU rules – this idea will undermine this battle.
  • With upwards of 250,000 “little power plants” raising a VAT invoice every quarter this will be an administrative night mare for all involved.

At this stage it is an interesting theoretical question and nothing more. If that changes we will definitely have an update and if you are interested enough to take this forward, ensure that you take the right professional advice.

If you’re still thinking about getting solar panels installed have a look at our Home Energy Assessment which will calculate your likely income from the Feed-in-Tariff scheme plus the savings on your bills.

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