Britain’s solar power industry has welcomed Chancellor George Osborne’s decision not to raise value-added tax (VAT) on solar panels from 5% to 20%.

The UK Government accepted an opposition amendment to the Finance Bill – the legislative instrument for enacting the Budget – to block the move, which was proposed by HM Revenue & Customs (HMRC) last autumn following a ruling by the Court of Justice of the European Union.

Leonie Greene, Head of External Affairs at the Solar Trade Association (STA), said: “Increasing VAT on solar to 20% while retaining 5% for grid electricity, gas and oil defies all logic, which is why the STA has consistently taken a strong line on this issue.

“The Chancellor can and should stand up to Brussels on this – lower VAT on domestic solar is within the guidelines set out in EU law.”

STA thanks MPs

She added: “The solar industry owes a big thank you to the MPs of all parties who rallied in support of solar over the last week and put their name to the amendment.”

Greene pointed out that HMRC was still officially reviewing responses to a consultation on the VAT proposals.

The STA thinks hiking VAT from 5% to 20% would add £900 to the cost of the average domestic solar project.

> See the STA's statement