Dairy

TEstimonial:
Commercial Unit- 38kW System
Martin Evans, Llangedwyn, Powys - Dairy Unit
Martin Evans, a Dairy Farmer from Llangedwyn, Powys
invested in a solar PV system from Wynnstay for energy
savings on his farm in February 2012.
He opted for a 38kW £65,000 system purchased through
Wynnstay and fitted by D Jones Electrical.
The system earns 34.5p per kW/h under the FIT’s scheme,
this has amounted to an income of £12,000 between
March and October, a monthly income of around £1,500.
Martin has also been able to use the electricity generate
for his own needs as well as receiving the feed in tariff
payments. The panels, along with the introduction of a
new milking parlour have allowed Martin to reduce his
electricity bill by just under £500 a month, reducing it from
£1,100 to £600.
‘I was very keen to invest in Solar PV panels to make
savings on the amount of electricity the farm uses, as well
as benefiting from the feed in tariff income. The service
received from the installer was very good and I would
definitely recommend to others.’ Mr Evans commented.
Solar PV- Taxation Considerations
There is a degree of miss information in the public domain regarding solar
panels and taxation. The gravest of these is that the receipts are tax free by
their very nature. This is not necessarily the case and, as with any project,
there are a multitude of considerations. The following highlights some of the
key taxation issues.
Broadly speaking, for solar panels to qualify for a domestic Feed in Tariff (FIT)
which is exempt from income tax the following criteria need to be met:
1. system capacity less than 50Kw; and
2. is installed by an individual at or near their home; and
3. they do not intend the system to produce electricity that will significantly
exceed the electricity used at the dwelling (HMRC consider 20% to be
significant in this case); and
4. the FIT is received in a private capacity i.e. not bought in the business
name, not used for business purposes nor advertised as part of the business.
The downside to treating the FIT as a qualifying domestic system is that there
is no tax relief available on the capital cost of the installation. In addition none
of the input VAT (reduced rate of 5%) on the capital cost of the installation is
able to be reclaimed as no business is being carried out.
Where a business installs a solar panel system, any income from the system
will be treated as a business receipt and will be taxed as such. However tax
relief is available on the capital cost of the installation.
For businesses, tax relief on the capital cost of the installation is given in the
form of capital allowances. The rate at which relief is given varies from 0%
for buildings right up to 100% for qualifying plant and machinery. Providing
the business qualifies to claim Annual Investment Allowance (AIA), 100%
tax relief will be available on the qualifying plant and machinery costs of
installing the solar panels up to the AIA limit.
For two years from 1 January 2013, the annual ceiling on AIAs has been
increased from £25,000 to £250,000. Special transitional rules apply where
the business’s accounting date is other than 31 December. For example, if
the accounting date is 31 March, the maximum qualifying expenditure for the
whole of the year to 31 March 2013 will be £81,250 of which only £25,000
may be spent before 1 January 2013. To the extent that the expenditure
exceeds the business’s available AIA, the qualifying plant and machinery will
qualify for a tax writing down allowance of 8% per annum (post April 2012
expenditure).
Input VAT (standard rate of 20%) on the capital cost of the solar panel
installation will also be reclaimable subject to the usual rules. In particular
any private use of the electricity generated by the system will need to be
considered on a case by case basis. There is no output VAT on FITs received
by the business as these are outside the scope of VAT. However, where export
tariff receipts are received by a business, these are subject to output VAT at
20%.
Whittingham Riddell LLP Chartered Accountants have extensive experience of
advising clients within the agricultural sector. Please contact Graham Murphy
on 01686 626230 if you have a query you would like to discuss.
Graham Murphy BA FCA
Partner at Whittingham Riddell LLP Chartered Accountants
www.whittinghamriddell.co.uk
Wynnstay are working in collaboration with D Jones Electrical Contractors to offer a range of renewable solutions to both agricultural
and domestic customers. For more information on solar PV and other renewable products please call 01691 662690.
Wynnstay Group Plc Dairy Newsletter Spring 2013 19