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UK solar sector handed stay of execution over VAT threat
March 22, 2016
The UK’s struggling solar power industry has avoided a 400pc VAT hike that threatened to weaken a sector already hammered by a cut in Government subsidies.
Chancellor George Osborne has agreed with opposition parties and rebel Tory MPs that the Finance Bill should be amended on Tuesday to give the Treasury the power to overturn the EU’s VAT rules and avert thousands of industry job losses.
Under EU rules solar firms could be forced to pay VAT of 20pc rather than current levels of 5pc from August this year. This would add £1,000 to the cost of a household solar installation.
Solar Trade Association spokeswoman Leonie Greene said a failure to renegotiate the VAT rate would be “very bad news” for domestic solar demand, which is a fifth of what it was this time last year.
But Ms Greene urged Government to restore industry confidence by committing to a lower rate “in black and white”.
“We hope that Treasury will issue an official statement confirming the Government’s intention as soon as possible. What prospective solar homeowners and the industry need more than ever is certainty – we need to know for sure,” she said.
The Government said in December that it would slash subsidies for rooftop solar panels by 64pc, prompting warnings from the industry that it could result in job losses of up to 18,700 and push many smaller firms into administration.
Ministers argued that subsidies for renewable energies, which are paid for through household and business energy bills, were becoming too expensive.
This, coupled with a potential VAT hike, would have forced many more people to cancel plans to install solar panels, the Renewable Energy Association warned.
Labour’s shadow energy minister Lisa Nandy, said: “Osborne’s shambolic climbdown on the solar tax shows the Government is in complete disarray. We will keep up the pressure to ensure this promise is honoured in the Finance Bill so that clean energy jobs are protected.”