Installer guide · 11 min read

VAT, CIS and the Domestic Reverse Charge on Commercial Solar: An Installer's Guide

By Roman Steer-Love, co-founder of TNW Marketing · published 23 October 2026 · rules checked against HMRC and GOV.UK on 23 October 2026

Short answer: installing solar on ordinary business premises is standard rated for VAT at 20%. The 0% rate in VAT Notice 708/6 is for homes and buildings used solely for a relevant charitable purpose, and ends on 31 March 2027. When you work as a subcontractor for another contractor, the VAT domestic reverse charge usually applies: you invoice without charging VAT and your customer pays it to HMRC. When you sell direct to the business that owns or occupies the building, normal VAT applies. If you pay subcontractors for construction work, the Construction Industry Scheme (CIS) may require you to register, verify them and deduct tax from their labour.

The VAT rate on commercial solar

GOV.UK sets the standard rate of VAT at 20%. VAT Notice 708/6 gives a zero rate for installing certain energy-saving materials, solar panels included, from 1 May 2023 to 31 March 2027, after which they revert to the reduced rate of 5%. That relief is for residential accommodation and, since 1 February 2024, buildings intended for use solely for a relevant charitable purpose. Ordinary commercial premises such as factories, offices, shops and warehouses are not covered, so installing solar on them is standard rated. The notice also says installation in hospitals and prisons is standard rated, and that energy-saving materials supplied without installation are standard rated.

Registering for VAT when you start trading is covered on our sister site's guide to starting a solar business. This page is about invoicing commercial jobs and subcontractors.

Which rule applies to which job

The domestic reverse charge for construction services

Since 1 March 2021, VAT on many construction services between businesses is paid to HMRC by the customer instead of the supplier. HMRC's supplier guidance says you must use the reverse charge if you are VAT registered in the UK and all of these apply:

• your customer is registered for VAT in the UK;
• the payment for your supply is reported within the Construction Industry Scheme;
• the services are standard or reduced rated;
• you are not an employment business supplying staff or workers;
• your customer has not given you written confirmation that it is an end user or intermediary supplier.

The services covered include installing systems of heating, lighting, air conditioning, ventilation and power supply. HMRC's guidance does not mention solar panels by name. The technical guide adds four points that matter on solar jobs:

• End users. A business that is VAT and CIS registered but does not make onward supplies of the construction services it receives is an end user. If it tells you so in writing, charge normal VAT.
• Goods with services. Panels and inverters supplied with installation are generally a single supply, so the reverse charge applies to the full invoice value.
• The 5% disregard. If the reverse charge element is 5% or less of the whole supply value, agreed at the start of the contract and not invoice by invoice, normal VAT can apply where the customer has given end user or intermediary notice.
• Zero-rated work is out. The reverse charge only applies to standard and reduced rated services.

Reverse charge invoices, step by step

1. Check your customer's VAT number with the GOV.UK VAT number checker.
2. Check whether the payment is reported under CIS. HMRC notes that some contractors may not show up on online checks, so ask.
3. Ask for any end user or intermediary notice in writing before you invoice, and keep it.
4. Word the invoice. It must refer to the reverse charge. HMRC's examples include "VAT Act 1994 Section 55A applies" and "Customer to pay the VAT to HMRC".
5. Show the VAT amount but do not charge it. If your software cannot show it, HMRC suggests adding "customer to account to HMRC".
6. Think about cash flow. You no longer collect VAT on that work, and HMRC's guidance suggests considering monthly VAT returns.

CIS for commercial solar installers

Under CIS, contractors deduct money from subcontractors' payments for construction work and pay it to HMRC as advance tax. CIS 340, last updated 27 August 2026, lists among construction operations the installation in any building or structure of systems of heating, lighting, power supply and others. Again, solar panels are not named, so confirm with your accountant how your own work is treated.

• Rates. 20% from a registered subcontractor HMRC can verify, 30% if they are not registered or cannot be verified, nothing for gross payment status.
• What is not deducted from. VAT, materials the subcontractor paid for directly, plant hired for the job, consumable stores and the cost of manufacturing or prefabricating materials.
• Gross payment status. The business must pay tax and National Insurance on time, do construction work in the UK and run through a bank account, with turnover (excluding VAT and materials) of £30,000 for a sole trader, or £30,000 per partner or director, or £100,000 for the whole partnership or company.
• Customers can be contractors too. CIS 340 says a business outside construction that spends more than £3 million on construction in 12 months becomes a deemed contractor, though work on its own business premises can fall outside the scheme.

Paying a subcontractor under CIS

1. Register as a contractor with HMRC before you pay subcontractors for construction work.
2. Verify each subcontractor with HMRC, which tells you the rate to deduct.
3. Deduct from the labour, not from VAT or materials they paid for. Ask for evidence of the materials cost.
4. Give a payment and deduction statement within 14 days of the end of each tax month (by the 19th).
5. File the monthly return within 14 days of the end of the tax month. From 6 April 2026, a mainstream contractor that paid nobody must file a nil return or report inactivity.
6. File on time. A late monthly return costs a £100 fixed penalty the day after the deadline, a second £200 penalty two months after it, and tax-geared penalties (the greater of £300 or 5% of the deductions on the return) at six and twelve months.