The renewables sector will be closely examining whether the Chancellor could extend zero-rated VAT to battery storage and ground source heat pump preparatory works following the Autumn Statement today. 

Zero-rating of VAT on all battery storage installations, not just those that are installed at the same time as solar panels, could dramatically cut the cost of battery technology for homeowners. This in turn could have led to much greater uptake, helping more households save on their energy bills and make the switch to renewable energy, according to the MCS Foundation. 

The MCS Foundation, along with ten other industry representatives and green groups, wrote to the Chancellor ahead of the Autumn Statement urging him to introduce the zero-rating for VAT on all battery installations. They also called for the zero-rating of VAT that currently applies to groundworks associated with ground source heat pumps (GSHP). 

The details of the Autumn Statement reveal that zero-rated VAT will be extended to cover items installed in buildings used for a relevant charitable purpose and also to cover specified additional technologies, with more detail to be released in the coming days. The MCS Foundation will be reiterating calls for these specified additional technologies to include battery storage and ground source heat pump works.  

Reacting to today’s Autumn Statement, 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.    

“The anomalies in the zero-rating of VAT that exclude some battery storage installations and work that is needed for ground source heat pumps need to be addressed to maximise the benefits of the policy. By zero-rating VAT on these products, the Chancellor could massively boost the domestic renewables sector and help households reduce bills and cut carbon with home-grown energy.” 

The MCS Foundation welcomed the announcement that there will be a consultation on ending the blanket ban on the installation of heat pumps within one metre of a property boundary. The current Permitted Development Rights (PDR) restrictions pose a significant barrier to heat pump installations, so easing the restrictions could help boost heat pump deployment.