Residential systems over 4kw. Are they still tax free?

[njcuk]

I'm trying to find out if residential systems over 4kw are taxable? Does anyone know?

Thanks

 

[TedM]

This is a little bit of a grey area as the tax free status of FiTs income is conditional on the electricity generated being 'incidental' to the domestic demand.

It is something that HMRC have not yet (as far as I know) been asked to rule on - but I can't imagine that they would be happy to allow tax exemption for anything much bigger than 4kW unless the house had an exceptionally high power requirement.

 

[njcuk]

thanks again.

 

[SRE]

This is a little bit of a grey area as the tax free status of FiTs income is conditional on the electricity generated being 'incidental' to the domestic demand.

It is something that HMRC have not yet (as far as I know) been asked to rule on - but I can't imagine that they would be happy to allow tax exemption for anything much bigger than 4kW unless the house had an exceptionally high power requirement.

I've checked this with a few colleagues who haven't heard about this - one has met a number of times with Greg Baker, it seems odd that this hasn't cropped up - although it could be one of those things that has been assumed. Where have you got your info from - I've got a few jobs coming up that are under 10kwp and I've told my customers that their generation will be tax free - the only tax implications I've heard about are for commercial rent a roof schemes.

 

[TedM]

I've no special insight into this other than reading exactly what it says in the relevant section of the Finance Act - which is:

20 Income tax exemption for domestic microgeneration

(1)In ITTOIA 2005, after section 782 insert—
“782A Domestic microgeneration

(1)No liability to income tax arises in respect of income arising to an individual from the sale of electricity generated by a microgeneration system if—

(a)the system is installed at or near domestic premises occupied by the individual, and

(b)the individual intends that the amount of electricity generated by it will not significantly exceed the amount of electricity consumed in those premises.

(2)In subsection (1)—

“domestic premises” means premises used wholly or mainly as a separate private dwelling, and

“microgeneration system” has the same meaning as in section 4 of the Climate Change and Sustainable Energy Act 2006.”

(2)The amendment made by subsection (1) has effect for the tax year 2007-08 and subsequent tax years.


Until HMRC actually look at this in individual cases then I don't think anyone is going to know for certain how the "not significantly exceed" part is going to be interpreted.

But at least you should draw your customers attention to the possibility that this could happen.

 

[SRE]

Thanks TedM I'm going to pass this on to my accountant to have a look at. What about commercial installations??

 

[TedM]

I think FiT payments made to commercial organisations would just be classed as income and taxed in the normal way. Possibly complicated by the way that payments can be netted off from a normal electricity bill and so could be seen a just reducing expenses. Your accountant is the best source of advice on this.