It remains unclear whether solar panels installed on farms and farmhouses will be eligible for the new reduced VAT rate of 0% on photovoltaic (PV) panels.

The Government is set to approve the VAT reduction on the purchase and installation of solar PV panels for homes and public buildings, in a move to encourage more people to switch to renewable energy.

The new rules were approved by the European Commission last April, which allows member states to apply a VAT rate of 0% to 5% for certain products and services that are consistent with EU environmental policies, such as solar panels.

Many farms are not registered to claim VAT back and the proposed new rate of 0% could make a significant difference to farms with smaller electricity usage.

However, as of the time of writing this article, the Government has not confirmed whether the rate will apply to farms or farmhouses.

Overlap

If farms are not eligible for the reduced rate but farmhouses are, then this could prove difficult to implement.

In Ireland, many farms and farmhouses share the same electricity meter and cannot be easily distinguished.

Furthermore, farms are now allowed to factor in their farmhouse electricity use when determining the size of solar PV system for which they can secure a grant under the Solar Capital Investment Scheme.

Savings

The new reduced rate represents a significant change, estimated to save an average of €1,000 on a domestic system.

According to Minister for the Environment Eamon Ryan, this will bring down the average cost of installation from €9,000 to €8,000, reducing the payback period to as little as 6.2 years.

The Green Party leader expects the VAT change to be introduced in the spring finance bill, following a recent amendment to the EU VAT directive.

The combination of the new VAT rate and the SEAI solar grant of up to €2,400 means that the total average cost of a home solar installation will fall to about €5,600, he said.

The Government is set to vote on the measure on Wednesday 5 April.