Solar PV Prices Slashed After FIT Change

SallyKing

wuthton wrote: »

Yes, they will pay their suppliers VAT, but as VAT registered companies they can then claim it back.

It is why wholesale prices are displayed in a + VAT format because most companies effectively don't pay it.

Surely at some point the VAT makes its way to the taxman? Someone must end up paying the tax somewhere along the line?

Sorry if its a dumb question, If I was an account I would probably know the answer...

JasonLVC

SallyKing wrote: »

Surely at some point the VAT makes its way to the taxman? Someone must end up paying the tax somewhere along the line?

Sorry if its a dumb question, If I was an account I would probably know the answer...

The VAT always rest with the end consumer of the goods/services (ie, you and me).

Wholesaler sells panels to fitter + VAT. The fitter pays the wholesaler the VAT charged on the panels. Fitter installs panels at customers home + VAT. Customer pays the fitter VAT which fitter pays over to HMRC. At same time, Fitter reclaims the VAT he paid over to wholesaler so wholesaler and fitter are both VAT neutral. Only one who has actually paid VAT is the home owner as they cannot reclaim the VAt charged to them back.

grahamc2003

SallyKing wrote: »

Surely at some point the VAT makes its way to the taxman? Someone must end up paying the tax somewhere along the line?

Sorry if its a dumb question, If I was an account I would probably know the answer...

If a vat registered company charges more vat from its cutomers than the vat it pays to its suppliers, then it pays the difference to the Vat authorities. The reverse is also true, those who pay out more vat than they take in get a vat refund every now and then.

wuthton

JasonLVC wrote: »

The VAT always rest with the end consumer of the goods/services (ie, you and me)

Exactly and as the RAR companies are giving the goods to the end user no VAT is paid.

I've been trying to think of another example of a business that gives away valuable goods and doesn't charge consumers anything but have failed to come up with any.

thenudeone

Latest email from British Eco confirming the slashing of installation costs:

The Feed-in Tariffs have long been considered to be the biggest motivation for consumers to purchase solar PV systems, the perception has generally been that the change to the tariff will be damaging to the renewable industry, however Tony O'Connor, Managing Director at BritishEco is optimistic.

He believes that there is still plenty to be hopeful about for those wanting to invest in renewable energy. He describes the future for the solar PV industry as being 'healthy and sustainable', explaining that, 'looking at the new tariff levels and taking into account the lower panel prices, BritishEco are still able to provide solar PV systems with a rate of return in excess of 10% - which we believe to be a great investment'.

“The renewable energy industry was rocked by the date change for the FITs, but it came as no surprise to Tony O'Connor that the tariff was lowered. 'We recognised that the FITs needed to be adjusted downwards to reflect significant reductions in product costs', he stated. 'And we are still committed to providing our customers with systems that will make them a good rate of return, as well as reducing our reliance on fossil fuels and combating climate change. The future is still bright for the solar industry as far as we are concerned'.

thenudeone

JasonLVC wrote: »

The VAT always rest with the end consumer of the goods/services (ie, you and me).

Wholesaler sells panels to fitter + VAT. The fitter pays the wholesaler the VAT charged on the panels. Fitter installs panels at customers home + VAT. Customer pays the fitter VAT which fitter pays over to HMRC. At same time, Fitter reclaims the VAT he paid over to wholesaler so wholesaler and fitter are both VAT neutral. Only one who has actually paid VAT is the home owner as they cannot reclaim the VAt charged to them back.

This is off topic and I don't want to start a debate; but it is true that VAT causes huge cash flow problems for many business who deal entirely with other VAT-registered businesses. Many have to pay VAT to HMRC before the customers have paid the invoices, so they are out of pocket; yet the customers are all VAT-registered and are reclaiming the VAT on their own VAT return. The net effect to HMRC is nil, but it does cause many problems to many businesses in the supply chain. Many of the problems could be solved in a stroke by implementing the same rules to UK trade that apply to intra-EU trade, i.e. you don't need to charge VAT to any customer who can prove that they are themselves registered for VAT. But that option seems unlikey to be implemented.
Rant over.

zeupater

wuthton wrote: »

Exactly and as the RAR companies are giving the goods to the end user no VAT is paid.

I've been trying to think of another example of a business that gives away valuable goods and doesn't charge consumers anything but have failed to come up with any.

Hi

The RaR companies are the end user, they become liable for the VAT as they retain title to the systems which become capital assets on their books, for which they will be able to claim capital investment tax relief ...

HTH
Z

Cardew

wuthton wrote: »

Exactly and as the RAR companies are giving the goods to the end user no VAT is paid.

I've been trying to think of another example of a business that gives away valuable goods and doesn't charge consumers anything but have failed to come up with any.

I can't think that is the case - but nothing would surprise me. Taxes are payable on 'Gifts with Reservation'.

Could a Taxi firm give cars to, say, pensioners, pay no VAT and get the pensioners to sign an agreement that the taxi firm could use the cars for 25 years?

Mickeyfin

As a new contributor, I'd like to add another related comment.

I just did an exercise on my current Electricity use and costs and factored in the now accepted 25% reduction in electricity use in using a 3.2kw SPV array plus cost/returns of other energy saving measures in my home eg changing lighting system.

The calculation sheet also shows the rate per Kwh from my present supplier. When I recalculated my energy costs with the reductions, I found my rate per Kwh increased by 8%. I then 'doubled' my current use and found the rate/Kwh decreased by a whopping 12%.

I tried this with a number of different suppliers and tariffs with similar results. I have not seen where this is factored into the new (or old) FITs Calculations I have looked at to date and while this energy pricing regime exists it must only further discourage energy saving measures including the now paltry returns on SPV's.

grahamc2003

Mickeyfin wrote: »

As a new contributor, I'd like to add another related comment.

I just did an exercise on my current Electricity use and costs and factored in the now accepted 25% reduction in electricity use in using a 3.2kw SPV array plus cost/returns of other energy saving measures in my home eg changing lighting system.

The calculation sheet also shows the rate per Kwh from my present supplier. When I recalculated my energy costs with the reductions, I found my rate per Kwh increased by 8%. I then 'doubled' my current use and found the rate/Kwh decreased by a whopping 12%.

I tried this with a number of different suppliers and tariffs with similar results. I have not seen where this is factored into the new (or old) FITs Calculations I have looked at to date and while this energy pricing regime exists it must only further discourage energy saving measures including the now paltry returns on SPV's.

I'm not sure why you're surprised that the cost/unit increases if you use less, and vice versa. Isn't that perfectly obvious from the tier1/tier2 charging structure?

Try the same with your car - you'll find the more miles you do, the less cost/mile you'll get, due to the fixed costs like RFL and insurance.

Although tier1 and 2 are relatively new terms in energy bills, the concept has always been there, in the standing charge which the tier system replaces (with no effect whatsoever for 99% of users).