MIP and VAT updates

[The Solar King]

In case you think there was nothing else to be doing, a quick update on both these topics.

The STA represented the UK at a meeting with about a dozen other national solar associations with EU Commissioner Malmstrom's top political adviser, Maria Asenius. Several meetings were also held with British MEPs. It looks fairly sure that on 7 December the Commission will launch an Expiry Review on this. Once this review has begun then the European Commission can consider arguments on ‘union interest’ i.e. that the duties (and MIP) are doing the EU more harm than good.

Will keep you posted on any developments or need if there are calls for evidence.

With regard to VAT:
This is the latest update you on HMRC’s recent holding brief https://www.gov.uk/government/publi...r-the-installation-of-energy-saving-materials on the VAT reduction ruling, which may cause VAT on Solar Thermal and Solar PV to rise from 5% to 20%. In summary,

· The government is “currently considering the implications of the decision”.
· It does seem there is still a risk that the reduced VAT rate may be removed.
· They won’t implement any changes before the Finance Act 2016 (July 2016).

Again will keep you posted.

Life's irony would be that MIP ends and VAT is imposed, one cancelling out the benefit of the other.

 

[Worcester]

The VAT affects every aspect of our business though as it also applies to:

Air source heat pumps, Boilers - wood fuelled, Central heating and hot water controls, Draught stripping, Ground source heat pumps, Insulation, Micro combined heat and power units, Solar panels, Water and wind turbines

And the cost of a ground source heat pump with heating and hot water controls is much much greater than the average solar pv installation.

 

[solarfred]

Spare a thought for the businesses that rely on supplying small PV modules under 200wp. The MIP was to protect EU manufactures from subsidised Chinese manufacturers. Trouble is there are no manufacturers (on mass scale) of smaller modules in the EU so the MIP has been anti competitive for this sector. That's a restrained response. The government representatives "negotiating" this deal are not in slightest bit interested. They are also not interested in the bypassing of the MIP by manufacturers sending their exports via Malaysia and re badging as "non Chinese" to escape the MIP embargo. They know but they have done absolutely nothing about it.

 

[solarfred]

News on the import restrictions from China......

EU solar panel producers win Chinese import curb extension | Reuters

So the MIP continues and the approved Chinese exporters will continue to concentrate on their core module sizes and will not use their limited export quota on "non core" smaller modules ie. sub 250wp. So the businesses relying on these smaller modules are going to suffer for another year+ paying over the odds per watt because there is no competitive legal supply. The EU is supposed to be investigating the circumvention of the MIP whereby modules are shipped via Malaysia and Taiwan ie. non Chinese but that has been going on for over 6 months and no results so far.

 

[The Solar King]

Rather a lengthy update and not too good:

HM Revenue and Customs have today issued a consultation on removing the 5% reduced VAT rate for the installation of solar panels (both thermal and PV) from 1 August 2016. This follows a European Court of Justice ruling in June that the UK’s reduced rate is illegal under the terms of the EU’s VAT Directive. However it is only three of the 11 energy saving measures (solar, wind and hydro) that have been singled out for complete removal. The other measures remain eligible in cases of social need as well as for wider residential applications, though in the latter case, if materials account for more than 50% of the cost, the reduced VAT rate will apply only to the labour element. The ECJ ruling does not affect the reduced 5% VAT rate charged on the supply of domestic fuels and electricity.

HMRC justifies removing the reduced rate for solar, wind and hydro as follows:

“The installation of ESMs can be seen as the “renovation” of a property but, in order to ensure that UK law is fully EU law compliant following the decision of the CJEU, we need to exclude certain items from the reduced rate in future on the basis that their installation cannot properly be said to ‘renovate’ a property (rather, they simply serve to generate electricity).”

This clearly misses the point that solar thermal does not generate electricity, and raises the question of why ground and air source heat pumps, as well as biomass and micro-CHP boilers are being retained.

The STA has issued a strong press release highlighting the negative impact this proposal will have on residential solar, especially when coupled with the proposed 87% cut to the domestic FiT, and stressing the need for push-back by both HMG and the Commission. they are also urgently engaging with DECC with regard to the FiT consultation – they said explicitly in their consultation response that tariff levels would need to be adjusted if the reduced VAT rate for solar is removed. Their analysis shows that if it is removed, the FiT domestic tariff that the STA has proposed in their consultation response needs to increase from 8 to12p/kWh in order to maintain the same return for customers, i.e. the rate it is going to be in January anyway under current degression. We have had an initial reassurance from DECC that they acknowledge the issue and are prepared to consider its impact within FiTs if the consultation proposal is implemented.

The consultation closes on 3[SUP]rd[/SUP] February 2016 and the STA will be looking to submit a strong response. Please will everyone else do likewise.

Sorry to be bringing you more bad news but need to keep you fully informed. The STA have been engaging on this issue along with a coalition of other organisations since the ECJ announcement and had hoped that the government would push back against the whole ECJ ruling. It is felt that solar is being treated unfairly and the STA will be trying very hard to get this proposal dropped.

Guys' if you are not members of the STA, if you are staying in the industry, now would be a very good time to consider joining. Those of us who are members cannot do it all on our own. There are several other ongoing consultations that may also affect the industry.

 

[Gavin A]

Guys' if you are not members of the STA, if you are staying in the industry, now would be a very good time to consider joining. Those of us who are members cannot do it all on our own. There are several other ongoing consultations that may also affect the industry.

If they haven't done it already, could you suggest to STA that they sort out their situation regarding taking the annual membership fee in monthly direct debits as opposed to in a lump sum?

 

[Worcester]

They'll argue that the difference between the technology seperation is between addition and replacement.

 

[Gavin A]

I think the best argument would be to get away from the renovation argument and aim to class renewables simply as people buying a proportion of their electricity up front for the next 30-40 years. If they did that with an energy supply company it would be 5% VAT, what's the difference between that and buying it by installing a renewable energy system?

 

[Gavin A]

but also that any systems where the equipment cost is less than 50% of the total cost should be eligible for 5% under existing rules. Which would apply for smaller systems aimed at higher self consumption proportions, which could well be a big part of the remaining domestic market.

And roof integrated solar as part of a roof renovation should clearly be charged at the same rate as the rest of the roof work.


btw, this is the wording of the EU regulation involved.

"renovation and repairing of private dwellings, excluding materials which account for a significant part of the value ofthe service supplied;"

 

[whinmoor]

I can't get my head around this bit:

"The measure is likely to affect fewer than 500,000 individuals (and households) and the impact on affected individuals (and households) is anticipated to be negligible."

So, ONLY half a million people will be affected. And the impact of whacking an extra £800 onto the bill is "negligible" !?!

 

[Gavin A]

£400 million net gain to the treasury mind.

 

[The Solar King]

If they haven't done it already, could you suggest to STA that they sort out their situation regarding taking the annual membership fee in monthly direct debits as opposed to in a lump sum?

Thanks Gavin for this. Have discussed with Paul Barwell CEO of STA. Yes we will accept monthly payments via standing order providing you commit to joining for a year so we can be sure we can deploy those fees as resources over the next 12 months.

Trust this is a helpful answer for both yourself and any others who may be interested.

We are already asking members to register as interested parties with the EU commission over MIP to do all we can to end this as soon as possible. Deadline to register is 21st December.

Fully understand people not wanting to decide on this until after FITs announcement next week.

 

[Gavin A]

it's a bit of an odd insistence that in the event of a company closing down they still would owe the remainder of the years subs. Basically it discriminates against sole traders who would remain liable for this, vs ltd companies who wouldn't.

If STA is able to influence the situation sufficiently that we don't have to close down then they would continue to get paid monthly, if not then they'll have to share the pain with the rest of us rather than still chasing us for their money after we've all gone bust.