UK VAT Relief for Residential Batteries Takes Effect

UK VAT Relief for Residential Batteries Takes Effect

UK Government Exempts BESS from VAT

Effective Feb. 1, the UK government has exempted retrofitted battery energy storage systems (BESS) from the 20% value added tax (VAT).

Publication Details

VAT No Longer Applicable For Retrofitting Batteries

Retrofitting batteries will no longer incur VAT in the UK, under updated tax rules.

Image: BusinessWire

Residential and Charitable BESS Exempt from VAT

Residential BESS are now exempt from VAT in the United Kingdom when installed either new or retroactively in conjunction with rooftop solar systems.

Previously, VAT relief was only available for domestic BESS if installed together with a new solar energy system. As of Feb. 1, a VAT zero rate will also apply to retrofitted residential BESS.

The VAT relief also applies to BESS when installed in charitable buildings.

Government Response to Solar Industry Campaigning

Extending zero-rating VAT relief to cover retrofitted BESS follows significant solar industry campaigning. In response, the UK government announced in December that it would expand its VAT relief for energy-saving materials (ESMs) to include all domestic BESS.

Water-sourced heat pumps and smart diverters were also zero rated as part of the change.

Industry Reaction to VAT Changes

“The cut in VAT is exceedingly welcome and we have every expectation that it will increase demand for home battery energy storage,” said Chris Hewett, chief executive of trade association Solar Energy UK. “By allowing solar power to be used after dark, it can double the savings offered by home solar power systems. There has never been a better time to upgrade than today.”

Wide Range of Energy-Saving Technology VAT Exemptions

The United Kingdom has already exempted a raft of energy and heat related technology from VAT, including solar panels, wind turbines, air-sourced heat pumps, insulation, draft stripping, central heating and hot water controls, micro combined heat and power units, and wood-fueled boilers.

VAT Relief Extension for Energy-Saving Materials

The VAT zero rating for energy-saving materials is scheduled to run until March 31, 2027.

Official Statement on VAT Relief Extension

Announcing the changes to VAT relief in December, Nigel Huddleston MP, financial secretary to the Treasury, said zero-rating energy-saving materials “will allow more households to install ESMs, improve the energy efficiency of their homes, and thereby reduce their energy bills.”

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