VAT rate - 5% or 20%

[SolarCity]

Does anyone know what the deal is with VAT rates for PV installs?

Obviously the rate is 5% for domestic installs, but what about large domestic installs?

If a 50kWp system was ground mounted and connected to a home, would this still be subject to 5% VAT even though most of the electricity would obviously be exported? Or doesn't this matter?

 

[SRE]

I think the vat man will see it as a commercial enterprise and want to charge vat at 20%. We wanted to install solar on 2 of our rented properties but by the time the vat has increased and the Fit is taxed it wasn't such a great deal. Ted or Worcester are bound to know the answer Ill be interested to see their view.

You'll need planning permission too won't you unless it's a very, very, very big house

 

[BruceB]

I cannot claim to have followed through to to actual legislation, but in this HMRC guidance the reduced rate appears to apply to 'dwellings' whatever their size and whether there is a commercial element or not.
HM Revenue & Customs

Regards
Bruce

 

[SRE]

Where do B & B's stand on vat?

 

[Worcester]

Looks like 20% for B&B's (not residential it's a business) and also for the 50kWp system due to it's intended use (generating significantly in excess of the electricity consumed)

In both instances the FIT income won't be tax free either for the same reason (Finance Act 2007)

However, the B&B is a business, so should be able to claim the installation against capital allowances and to offset the VAT

2.16 What is residential accommodation?

The installation of energy-saving materials is only reduced-rated if they are for use in the following types of residential accommodation:

• houses, flats or other dwellings;
• armed forces residential accommodation;
• children’s homes;
• homes providing care for the elderly, disabled people, or people who suffer or have suffered from drug or alcohol dependency or mental disorder;
• hospices;
• institutions that are the sole or main residence of at least 90% of their residents;
• monasteries, nunneries and similar religious communities;
• school and university residential accommodation for students and pupils;
• self catering holiday accommodation;
• caravans that are sited on permanent residential caravan parks. They must be either longer than 7 metres or wider than 2.3 metres, excluding towing bars and similar apparatus used solely for the purpose of attaching the caravan to a vehicle; and
• houseboats that are designed or adapted for permanent habitation and have no means of self propulsion, or other boats which are used as a person's sole or main residence, such as canal boats and Dutch barges, on which the boat owner pays Council Tax or domestic rates.

The reduced rate does not apply to the installation of energy-saving materials in hospitals; prisons or similar institutions; hotels or inns or similar establishments.

Here's what our accountants are telling businesses and business owners:

What are the Tax and VAT implications?

No income tax would be payable in respect of income arising to an individual for the sale of electricity generated by a domestic micro generation system provided:
1. The system is installed at or near domestic premises occupied by the individual
and
2. The individual does not intend to generate an amount of electricity which is significantly in excess of the electricity consumed in those premises.

If the intention is to make profits from generation, or it is being received by a business, then the generation and export tariff would be taxed as trading income.

If a business registered for VAT receives the FIT, the export tariff will be regarded as a taxable supply and subject to VAT. The business will receive the VAT on top of the export tariff and then pay it on to HMRC, therefore it should not be a cost to the business. The generation tariff is outside of the scope of VAT and thus no VAT is charged on this tariff.

Where the installation is on a residential property, the installer should charge VAT on the installation at the 5% reduced rate and, provided that the installer also provides the equipment, the reduced rate will apply to that as well.

Businesses that are VAT registered should be able to reclaim the input tax on the equipment and installation, although they should seek advice on their specific position.

They should also be able to claim capital allowances on the cost of the equipment.

i.e. if you are going to install a 50kWp system, then unless you can prove otherwise you'll be treated as a business.


If I remember rightly @TedM also operates a B&B / self catering holiday accommodation so he can probably give the definitive, though knowing him he has probably carefully chosen the right category

 

[t4sltd]

We have recently been told by the VAT man that they would consider an installation on a farm outbuilding as eligible for reduced rate as the electricity would be used in a house.

 

[JD6400]

t4sltd how big is the array ?

 

[t4sltd]

4kw so yes it would be used in the house

 

[Liam Norman]

Hi chaps, I'm in exactly this position. A client has greatly extended and refurbished a country/farm house. He has designed the whole job in mind of a 50kW system that he wants in an adjoining field. I am about to contact the VAT office to argue our case for 5% in this instance and will update this forum with the results, if you would like?

 

[JD6400]

Hi chaps, I'm in exactly this position. A client has greatly extended and refurbished a country/farm house. He has designed the whole job in mind of a 50kW system that he wants in an adjoining field. I am about to contact the VAT office to argue our case for 5% in this instance and will update this forum with the results, if you would like?

Thanks for that , it is always good to know how others are getting on with it ?

 

[GreggElectrical]

Any further info on this would be appreciated. I have two 10kw installs on farm buildings but connected to the same supply as large farm houses.

 

[Markc]

I have a few 30kWp at planning stage currently (thanks dpelectricalltd!!:yesnod::yesnod::yesnod

One, for a privately owned manor house. This is at 5%

Two, on a agricultural building which is owned privately but rented out. The owner is not VAT registered the tenant is. This is at 20% VAT

Case two his accountant has suggested going VAT registered before the installation? I think this might be questioned by the VAT man but its not my concern.

 

[BruceB]

Case two his accountant has suggested going VAT registered before the installation? I think this might be questioned by the VAT man but its not my concern.

Should not be a problem. You are allowed to elect for VAT registration even if activities are below the registration threshold. Problem might be the time they take to register him.

 

[darrens1973]

you can back date vat on expenditure for up to 3 years before the business was registered for vat I believe