VAT reclaim on commercial solar for business solar
May apply to your businessCommercial solar is standard-rated at 20% VAT — but a VAT-registered business can normally reclaim that VAT as input tax.
Who qualifies
The business must be VAT-registered and must use the solar installation for making taxable (standard/zero-rated) supplies. Solar panels on commercial/business premises do NOT get the 0% VAT that applies to residential and charitable-building installs under VAT Notice 708/6 — that relief is restricted to dwellings and buildings used solely for a relevant charitable purpose, so commercial installs are standard-rated at 20%. That 20% is then recoverable as input tax under the normal rules. Businesses that make exempt supplies (e.g. some finance, insurance, or exempt property) may be partly exempt and unable to reclaim all of it.
How much it is worth
20% VAT is charged on the commercial solar installation. A fully-taxable VAT-registered business can reclaim 100% of that VAT as input tax on its VAT return, making the effective net cost the ex-VAT price. Example: on a £100,000 + VAT install (£20,000 VAT), a fully-taxable business reclaims the £20,000, so cash outlay nets back to £100,000.
Where it stands in 2026
Live — standard VAT rules. The 20% standard rate and normal input-tax recovery rules are unchanged. The zero-rate for energy-saving materials remains residential/charitable-only (extended to charitable buildings from 1 February 2024), so commercial premises stay standard-rated.
How to claim the VAT reclaim on commercial solar
- 1Ensure the business is VAT-registered (register with HMRC if turnover exceeds the threshold or register voluntarily).
- 2Obtain a valid VAT invoice from the installer showing the 20% VAT charged.
- 3Reclaim the VAT as input tax on the VAT return covering the period of the invoice.
- 4If the business makes any exempt supplies, apply the partial-exemption method to work out how much input VAT is recoverable — take advice from your accountant.
Key facts, checked against official sources
- VAT Notice 708/6: the 0% energy-saving-materials rate applies only to residential accommodation and buildings used solely for a relevant charitable purpose — commercial premises are standard-rated at 20%.
- Charitable-building zero-rate was added from 1 February 2024; commercial business premises still do not qualify.
- Standard VAT rate is currently 20% (gov.uk 'Charge, reclaim and record VAT').
- VAT-registered businesses can reclaim input VAT that relates to taxable business supplies; partly-exempt businesses cannot reclaim exempt input tax in full.
Reliefs like this change the true net cost of every funding route. Model it in the finance calculator, or see how it fits alongside the other options on the grants & funding hub.