VAT's enough

With the recent Paris Climate Change conference, changes to the feed-in tariffs after Christmas, announcements about the Renewable Heat Incentive (RHI) in November and now a consultation about reducing the tax relief on VAT for installing renewable energy systems, it has been a busy and conflicting few weeks of Government policy changes. The Chancellor’s autumn statement was generally good news for the RHI. It brought some much needed respite to the industry and in the short-term the RHI will continue without significant change. The more worrying news is that, following a consultation in the Spring, the Government wants to reform it. No-one seems to know what form these reforms will take, only that funding caps will be put in place and the major changes to the scheme will be implemented in 2017. The more positive news is that, it appears, the overall funding for the RHI is actually going up and that the RHI will exist for new applicants until 2021, but the on-going lack of clarity about the reform of the scheme and what it will look like after 2016 is still causing nervousness, with installation companies and clients alike. However, the more recent news on the changes to VAT is much less helpful. Currently the installation of a renewable energy system in a domestic property is rated at 5% VAT. However, during the summer the Government lost a case in the European Court about this policy and as a result has to revise it. HMRC have a consultation document in which they propose a number of significant changes. If these proposals go ahead as planned in August 2016, we expect the total cost of a project to domestic customers to increase in the region of 10% or more. We are of course responding to the VAT consultation and would encourage you to do the same. So its been a strange few weeks, the continuation of the RHI one week, signing up to the Paris climate change accord the next and announcing an increase in taxation on carbon reduction technologies the next! Could the Government’s stand point be any clearer?

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