Vale & West Chartered Accountants Blog

Government urged to scrap VAT changes on renewables

Trade associations representing the smart power industry have written a joint letter to the Government and have called for proposals to raise VAT on certain energy-saving materials to be scrapped.

Meanwhile, Chris Bryant MP has called on ministers to scrap VAT on sunscreen in a bid to cut skin cancer by encouraging more people to use it, after being treated for the condition himself.

The joint letter, which was signed by the Solar Trade Association (STA) and the Sustainable Energy Association, claims that evidence from across the sector suggests that the suggested proposals could lead to “bankruptcies and job losses”.

The letter goes on to say that if the proposals take place, the threshold for material costs should be raised to 85 per cent, as this could ease the impact on the UK’s “nascent battery storage and other smart power technology markets”.

According to the STA, installations typically consist of two elements – materials and labour. Moreover, solar has an “exceptionally high requirement” for skilled labour. Therefore, although as the proposals stand, most solar-only schemes will “comfortably” fall below the 60 per cent threshold, some schemes are at risk. The STA added there is also a “significant risk” to installations of solar and battery storage, as the material costs will likely often be over the 60 per cent threshold.

Meanwhile, Mr Bryant’s VAT argument is that there is more the Government could do to encourage more people to use sunscreen, and one option would be to take VAT off sunscreen that is higher than SPF-30 or SPF-50.

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