The government plans to remove VAT from standalone home energy storage systems from February 2024.
It has published the outcome of its consultation, stating that it will be expanding VAT relief from 1st February 2024 to include the installation of qualifying energy-saving materials (ESMs):
- electrical battery storage
- water-source heat pumps
- diverters retrofitted to ESMs such as solar panels and wind turbines
The relief will also be extended to the installation of all qualifying ESMs in buildings used solely for a relevant charitable purpose and will continue to apply when these ESMs are installed in residential buildings.
A discrete list of groundworks necessary for the installation of certain types of heat pumps will also be brought within scope of the relief, thus allowing all aspects of the installation of ground-source and water-source heat pumps to be relieved of VAT, even those activities that are co-contracted.
Nigel Huddleston MP, Financial Secretary to the Treasury, said:
The government welcomed the sector’s positive response to the expansion of the VAT relief on energy-saving materials (ESMs) announced at Spring Statement 2022. As well as bringing more ESMs into the scope of the relief, last year’s reforms made the relief easier for consumers to access and, crucially, zero rated qualifying ESMs for VAT purposes. This will enable more households to install ESMs, improve the energy efficiency of their homes, and thereby reduce their energy bills. By focusing on reducing costs on UK families, it will help to deliver on the government’s pragmatic, proportionate, and realistic path to reach net zero by 2050.
The government also listened to calls from industry to go further still in order to ensure that government support remains in step with the rapidly evolving ESMs landscape. Subsequently, at Spring Budget 2023, the government launched a Call for Evidence (CfE) seeking views on potential areas of further reform. In particular, the government sought views on expanding the relief to additional technologies, and capitalising on our Brexit freedoms by re-instating the relief for the installation of qualifying materials in buildings used solely for a relevant charitable purpose. As announced at Autumn Statement, I am delighted that the government will be making further reforms to this relief as a result of this CfE. All of these reforms will be implemented across the UK thanks to the Windsor Framework.
Responding on LinkedIn, Griff Thomas, MD of GTEC, said:
Fantastic news now released about VAT on energy storage systems (batteries)
Policy now sets out that installations of batteries alone will be zero rates from February 1st 2024 without the need to install alongside solar
Not only will this help those who want to maximise opportunities by charging off peak and discharging on peak this opens up options to install a battery alongside a heatpump for those hard to treat homes where a higher flow temperature may be required and where a battery can reduce future running cost by using off peak tariffing!
