VAT on church solar panels

The short answer, for most churches, chapels, mosques, synagogues and halls: 0%, until 31 March 2027. Not 20% with a rebate to chase afterwards, and not 5%. Zero, charged that way by the installer on the invoice, with no form to submit.

That is a more recent position than most church funding guidance reflects, and it matters more than any single grant on a typical project. On a £25,000 installation the difference between 0% and 20% is £5,000. This page sets out why the rate applies, the two tests your building has to meet, what changed when the Listed Places of Worship Grant Scheme closed, and what to check on a quote.

Why the rate is zero

Installing solar panels is an installation of energy-saving materials. That category has long been relieved in homes. Since 1 February 2024 the relief has also applied to buildings intended for use solely for a relevant charitable purpose, which is how a place of worship held by a charity normally gets there.

The relief is temporary. It runs until 31 March 2027, at which point the rate is due to revert to 5% rather than to 20%. So a parish weighing up whether to install now or in three years is not choosing between the same price twice: the same work is likely to cost 5% more on the other side of that date, on top of whatever has happened to equipment and labour prices.

The two tests your building has to meet

1. Relevant charitable purpose

HMRC defines use for a relevant charitable purpose as use by a charity in either or both of two ways: otherwise than in the course or furtherance of a business, or as a village hall or similarly in providing social or recreational facilities for a local community.

A church, chapel, mosque or synagogue in use for worship by a charity meets the first limb: worship is not a business activity. A church hall, parish room or community centre providing social and recreational facilities to the people around it can meet the second. That second limb is broader than the words suggest — it is not restricted to buildings in villages, and it is not restricted to buildings called halls.

2. "Solely" — and the 95% rule that decides it

This is where projects come unstuck, and it is the question a careful installer will ask you.

"Solely" reads as absolute, but in practice HMRC treats a building as used solely for a relevant charitable purpose where at least 95% of its use is for that purpose, exercising discretion to ignore a small and incidental amount of business use.

So the Tuesday-evening pilates class that pays the hall £30 an hour will not cost you the relief. A full-time commercial nursery on a lease, a trading café, a mast on the tower generating rent, or a steady programme of paid private hire could. The test is applied building by building, not to the charity as a whole, so a parish can hold a church that qualifies and a hall that does not — or the reverse.

If your building is close to the line, work out the numbers before you get quotes. It is an honest conversation about lettings and hours of use, not a technicality, and it is far cheaper to have it before the invoice than after.

What changed when the Listed Places of Worship scheme closed

The Listed Places of Worship Grant Scheme reimbursed the VAT on works to listed places of worship. It closed to new and returning applicants on 31 March 2026: the £23 million budget for 2025–26 was fully allocated, any outstanding decisions were issued by 15 April 2026, and the government confirmed there would be no further funding rounds. The announcement was made on 22 January 2026.

In England it is replaced by the Places of Worship Renewal Fund — £92 million over four years, funded by DCMS and delivered by Historic England. Two cautions about the replacement: it covers England only, and it is aimed at the repair and maintenance of the buildings most at need. Its published criteria do not mention energy efficiency, decarbonisation or solar, so do not put it in a solar budget on the assumption that a PV project qualifies. Across the whole UK, the National Lottery Heritage Fund remains open to places of worship for heritage projects.

Why the closure does not cost you the VAT on solar

Here is the part that most guidance still gets wrong, including guidance written since the closure. A church that qualifies for the zero rate never pays the 20% in the first place, so it has nothing to reclaim and loses nothing when a reimbursement scheme closes. If your funding stack contains both a 0% VAT line and an LPW rebate line, it is double-counting a saving you can only have once — and one of the two no longer exists.

Read older guidance with that in mind. Advice telling you to "submit the LPW claim within 12 months of the invoice date" was correct once and is now a dead end.

Where the closure genuinely hurts

It would be wrong to say the closure does not matter. It matters a great deal — just not for solar. LPW reimbursed VAT on repairs and maintenance to listed places of worship: roofing, stonework, rainwater goods, structural work. That work is not an installation of energy-saving materials and is not zero-rated, so a listed church repairing its roof now carries VAT at the standard rate with no reimbursement route in England beyond whatever the Places of Worship Renewal Fund turns out to cover.

This has a direct consequence for solar projects, because the two are often done together. A parish re-roofing a slope and putting panels on it is buying two different things at two different VAT rates: the repair at the standard rate, and the solar installation at 0% while the relief lasts. Ask for the quote to separate them. A single undifferentiated price makes it impossible to see whether the installer has applied the relief at all.

Buy the installation, not just the panels

The relief is for the installation of energy-saving materials, with the materials supplied as part of that installation. Buying panels yourself and engaging someone separately to fit them is a different transaction from buying an installation, and it can put the relief at risk. If the zero rate matters to your budget — and at up to 20% of capex it should — buy the work as a single supply from the installer rather than splitting it to save on equipment.

The evidence your installer needs

The installer, not the church, carries the risk of applying the wrong rate. HMRC expects installers to take reasonable steps to establish that the customer will use the building for a relevant charitable purpose, and to keep the documentation.

In practice that means you should expect to be asked how the building is used, whether any part of it is let commercially, and to confirm the position in writing. This is a good sign, not an obstacle. An installer who applies 0% without asking anything about the building's use has done no diligence, which should make you wonder what else has not been checked. Keep your own copy of whatever you sign, alongside the invoice.

What to check on the quote

• The VAT line. A church solar quote showing 20% VAT is a question worth asking before you sign, not after. It may be right — if the building fails the solely test — but it should be explained.
• Repairs shown separately from the solar installation, because they carry different rates.
• No LPW rebate anywhere in the figures. If it appears, the quote is working from pre-2026 guidance.
• No double-counted VAT saving — 0% VAT or a rebate, never both.
• MCS certification, checked on the MCS register rather than taken from a logo. It is what lets you register for the Smart Export Guarantee, and grant programmes commonly ask for it.
• The date. If the work will complete after 31 March 2027, ask which rate has been assumed — what the 2027 deadline means for project timing covers how to sequence a project around it.

Where this fits in the funding picture

The VAT rate is the one saving that needs no application, no competitive round and no reporting conditions, which is why it belongs at the top of a funding plan rather than as a footnote. Grants sit on top of it: our guide to church solar grants sets out which programmes are currently open, including the Demonstrator Churches Project and Buildings for Mission. If the building is held by a charity and you are considering letting someone else own the panels, the charity solar rules covers the Charities Act rules on leasing a roof. If the building is listed, the listed buildings guide covers the consent route, which the VAT position does not change.

One thing the VAT position does not touch is consent. Whether you need a faculty, listed building consent or no application at all is decided by the denomination, the use and the curtilage, not by the tax treatment — which route applies to a listed church sets that out separately.

Finally, a caveat that applies to every page of this kind, including this one. VAT treatment depends on the facts of your building and your works, reliefs get extended and withdrawn, and 31 March 2027 is a published end date rather than a promise. Confirm the treatment of your own project with the installer and, where the sums are large or the building is mixed-use, with your own accountant.