Are Feed in Tariffs really tax free?

For anyone looking at investing in solar panels or wind turbines, the information is very misleading, so beware!

With many farmers now considering this type of investment in an eligible energy source where Feed in Tariffs are available it is important to consider the tax consequences.  Sophie Howard considers the tax position … 

INCOME RECEIVED FROM FEED IN TARIFFS

The exemption from income tax that many farmers have heard about is for domestic properties only.  In order to claim the exemption the electricity generated must be mainly for your own personal use.

This means for companies and other businesses the income is taxable unfortunately as the electricity will be used for non-domestic purposes.

VAT

If VAT registered then VAT should be charged on the export feed in tariffs but not on the generation feed in tariffs as generation feed in tariffs are outside the scope for VAT purposes. Please note VAT will also need to be charged on any electricity sold to a tenant.

CAPITAL ALLOWANCES

The plant element of the cost of the microgeneration system will be eligible for capital allowances if purchased by a business. Depending on the system, enhanced capital allowances may be available along with the annual investment allowance.

For more information or to arrange a free consultation please contact: Jonathan Crowther FCA or Sophie Howard ACA at Pershore (01386 552644) or Ledbury (01531 631500) or email  farming@crowther.co.uk