VAT or no VAT on solar?

[sajesak]

Hi, I am in the process of seeking quotes from local companies to supply and install solar PV & battery in a residential property. I would like to check if my understanding of the VAT exempt status is correct. A local company (VAT registered) will be used to supply and install the equipment. The quote I have received for the panels and inverter seems to be inclusive of VAT (based on a Google search of wholesale suppliers). Am I correct in my understanding that as a customer, I should be paying cost of the solar and battery related supplies net of VAT?

(split from hi-jacked post)

 

[johnb2713]

You are correct, here's the government document from HMRC

https://www.gov.uk/guidance/vat-on-...7086#installations-of-energy-saving-materials

 

[binky]

I very much doubt any solar fitters will pass the vat reduction on to you. All materials are bought at 20% and then 15% claimed back from HMRC. However, that can be upto 3 months to claim back, so most installers treat it as bonus money when it turns up.

 

[johnb2713]

I very much doubt any solar fitters will pass the vat reduction on to you. All materials are bought at 20% and then 15% claimed back from HMRC. However, that can be upto 3 months to claim back, so most installers treat it as bonus money when it turns up.

2 years ago when it was first announced, I had placed my order for my solar install. I asked them about the government announcement and they removed the VAT from my bill. Surely they must NOT charge the VAT on the equipment and installation, if the laws says it's 0%.

 

[Bob Minchin]

They should not add vat to their labour but could easily make a fast buck by charging you for the invoice price for their materials which includes their vat and overlooking giving you a rebate when they get theirs!

 

[binky]

2 years ago when it was first announced, I had placed my order for my solar install. I asked them about the government announcement and they removed the VAT from my bill. Surely they must NOT charge the VAT on the equipment and installation, if the laws says it's 0%.

But the reality is we pay vat upfront on materials. No business can really afford to be out of pocket for months, unless it has a lot of cash in the bank. Labour is fine as that's an ongoing expense. I used to charge the job at more or less cost, the vat return was my profit. Other businesses will work it differently. To really pass the vat savings onto customers, we really need not to be paying vat upfront on the materials. Which would have saved doing vat returns to HMRC.

 

[johnb2713]

They should not add vat to their labour but could easily make a fast buck by charging you for the invoice price for their materials which includes their vat and overlooking giving you a rebate when they get theirs!

I've been in business for over 30 years and VAT registered all of that time. I really dont see how they would put the invoice bottom line (inc VAT) straight across to the customer, I dont see how that would go through the books as it were, nowadays you have to use accounting software that is HMRC approved and connects directly so the purchase invoice for materials would have the VAT aspect seperated off and the materials go into stock. The customer invoice you have to use 0% VAT for this work on both labour and materials, anything else would be an infringement of HMRC Tax Law?

 

[johnb2713]

But the reality is we pay vat upfront on materials. No business can really afford to be out of pocket for months, unless it has a lot of cash in the bank.

Well it's not months really, generally 30 to 60 day account for paying a supplier and VAT is usually done for a quarter although monthly is an option, HMRC pay back the VAT due within a couple of days usually, realistically the VAT is likely to be sorted in less than 30 days.

Labour is fine as that's an ongoing expense. I used to charge the job at more or less cost, the vat return was my profit. Other businesses will work it differently. To really pass the vat savings onto customers, we really need not to be paying vat upfront on the materials. Which would have saved doing vat returns to HMRC.

It's not how the system works though

 

[binky]

Trade accounts offering 60days are few and far between, and what I've seen of those, don't offer the best prices. 30 days is the norm.

Anyway, I'm not saying how it should work, I'm saying how it does work. My prices were still far better than the bigger outfits.

 

[sajesak]

thank you for moving the thread

 

[Ronski]

Pre zero vat rate, the installer may have charged 10% mark up on materials, then added VAT, now it's probably 30% mark up, and no VAT.

Basically you can't be charged VAT but the installer decides how much mark up they put on the parts, labour rates could also be increased by 20%

 

[Robert Burns]

Maybe you could buy solar from China directly