Is VAT charged on commercial solar panels?
Yes. Commercial solar installations are charged VAT at the standard 20% rate — the zero rate available on some domestic work does not extend to business premises. If you are VAT-registered and the system serves taxable business activity, the VAT is normally recoverable as input tax, making it a cashflow item rather than an added cost.
Last updated 18 September 2026.
Key facts at a glance
| Rate on commercial installs | 20% standard rate |
|---|---|
| Domestic zero rate | Does not apply to business premises |
| VAT-registered business | Normally recoverable as input tax |
| Partly exempt bodies | Recovery may be restricted |
| Finance and PPA payments | Own VAT treatment — compare like for like |
| Cashflow effect | Paid up front, recovered in the next return |
The cashflow point people miss
On a £200,000 system the VAT is £40,000 payable at invoice and recovered on the following return. Fully taxable businesses see it wash through; the planning question is simply whether the working capital is available in that window, or whether the funding package covers it.
Where recovery is restricted
Charities, partly exempt organisations, some public bodies and businesses with mixed exempt supplies may recover only a proportion. If that applies, treat the irrecoverable element as part of the project cost in the business case rather than discovering it at invoice stage, and take advice on your own position.
Related reading
FAQ
Can we reclaim VAT on a solar system serving a let building?
It depends on the VAT status of the property income. Opted-to-tax commercial lettings usually allow recovery; exempt lettings usually do not. Confirm with your adviser before budgeting.
Is VAT charged on export payments?
Export income is a supply of electricity, so if you are VAT-registered it is normally accounted for in the usual way. Your supplier's agreement sets out the mechanics.
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