Boost for batteries and heat pumps with zero-VAT announcement
The Government has today announced a welcome boost to battery storage and the water- and ground-source heat pump sectors by zero-rating VAT on these technologies and associated works.
Zero-rating of VAT on all battery storage installations, not just those that are installed at the same time as solar panels, will dramatically cut the cost of battery technology for homeowners by 20%. This in turn could lead to much greater uptake, helping more households save on their energy bills and make the switch to renewable energy, according to the MCS Foundation.
Ahead of the Chancellor’s Autumn Statement, the MCS Foundation, along with ten other industry representatives and green groups, wrote to the Chancellor urging him to introduce the zero-rating for VAT on all battery installations. The coalition also called for the zero-rating of VAT that currently applies to groundworks associated with ground source heat pumps (GSHP).
So it is very welcome that following a recent consultation, Financial Secretary to the Treasury Nigel Huddleston MP has announced that these policies will be introduced.
Reacting to the news, David Cowdrey, Director of External Affairs at the MCS Foundation, said “The introduction of zero-rating for VAT on domestic renewables and energy efficiency measures in March 2022 has been really well received and has contributed to making 2023 a record year for renewable energy installations, including battery storage. The rising number of solar panels, batteries, and heat pumps, incentivised by the zero rating of VAT, being installed is helping consumers to save on their energy bills and is helping to deliver the Governments net zero targets.
“It is wonderful news that the remaining anomalies in the zero-rating of VAT, that exclude some battery storage installations and work needed for ground source heat pumps, have been addressed. By zero-rating VAT on these products, the Treasury has massively boosted the domestic renewables sector and help households reduce bills and cut carbon with home-grown energy.”
Mark Thompson, Managing Director at AceOn group, welcomed the news, commenting: “Having worked with MCA to develop the MCS 3012 Battery Energy Storage, it was our mission to then push the Government for zero-VAT so we create the demand for the UK battery market. We are delighted to see the zero-VAT rating, and with the battery strategy published last week and the UK’s first battery apprenticeship just announced, this is the icing on the cake for the battery energy storage sector.”
Bean Beanland, Director for Growth and External Affairs at the Heat Pump Federation, said “The Heat Pump Federation is delighted with the outcomes of the newly confirmed adjustments to the zero-rated VAT regime for Energy Savings Materials, and for heat pumps in particular. In concert with MCS and other industry colleagues, we have worked very constructively with both Treasury and HMRC to achieve the inclusion of water-source heat pumps and the acknowledgement that ground-source groundworks needed independent recognition so that consumers could enjoy the full benefits and protections of Professional Indemnity Insurance. We look forward to similar collaborations to deliver updates to VAT Notice 708/6 to provide the required clarifications on the allowable ancillary supplies, such as radiator upgrades and the installation of UFH.”
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Notes to editors
About the MCS Foundation
The MCS Foundation’s mission is to decarbonise homes, heat and energy. We were founded to oversee the MCS standards scheme which is run for public benefit and certifies the quality of renewables and their installation across UK homes. In addition, we support and develop programmes to address critical issues like retrofitting UK homes at scale, expanding the skills-base the sector needs, and commissioning independent research that informs and shapes better decision making to drive a carbon free future for all UK homes. For more information: https://mcsfoundation.org.uk/