British homeowners could possible face increases for the cost of installing solar panels, as the European Court of Justice has recently ruled that the lower 5% rate of VAT is only supposed to apply for social housing and that the current fixed rate breaches the EU law.
For a Solar panel system of £5,000 current cost (net) that would mean the VAT would rise from £250 to £1,000 – a significant amount and this is in the face of the EU imposing targets & demanding for the UK to improve overall energy efficiency.
This ruling is also challenging the governments’ commitment not to increase income tax, VAT and national insurance in the UK – this was mentioned in the speech that the Queen delivered. It also seems to be one of those contradictory rulings that the EU is famous for, as on one side they demand reductions in the “carbon footprint” and then make it more costly for individuals to move to easily fitted renewable energy options (like solar panels).
Luckily, changes that come into force after the ruling are not going to be applied retrospective so persons who have already ordered or paid for their work should be OK.
How long the Conservative government will oppose this ruling is up for debate, even though a spokesperson for the UK government said the following:
“The government has committed to a tax lock that will rule out rises”