Do you have a commercial or a residential property portfolio? If yes, it’s worth looking further into this:
Non-domestic minimum expected energy standards (MEES) requires any non-domestic private rented property to have an Energy Performance Certificate (EPC) level of a B by 2030, but at least a rating of C by 2027, to meet the government’s ambition of achieving net zero by 2050. The installation of renewable energy is key to meeting this and solar panels can help meet this.
SolarTherm UK are already undertaking work on many property portfolios and we are advising our clients of this:
The installation of solar panels is eligible for special rate pool allowances that would be subject to the £1m annual investment allowance (AIA)
This allows 100% tax relief on eligible assets such solar for commercial roof space. So alongside purchases such as plant and machinery, integral features including solar panels are also now accepted. There is a 50% first year allowance for solar panels, meaning solar comes under the new ‘full expensing’ rules. This started in April 2023 and HMRC state will run until 31 March 2026. The 50% allowance is particularly useful where a company does not have sufficient AIA.
The tax impact is shown as below where the full 50% first year allowance is available:
In the table example, 6% of the remaining amount (i.e., £35,000) can then be claimed each year until the asset is fully paid off. It is better to use the company’s Annual Investment Allowance against special rate pool items as a priority first, to other purchases.
Timing of the purchase is important as if the payment for the expenditure is 4 months or more after the unconditional obligation to pay arises, then expenditure is treated as occurring on the date of payment. Depending on the circumstances this may shift the tax relief available onto the next accounting period.
It’s also worth checking whether any grants are available to fund the purchase of solar equipment, for example Locase (https://locase.co.uk/) (Low Cost Carbon South East) runs until June 2023 (last grants panel is currently set for early May) which provides funding up to £10,000 on energy efficient equipment (certain eligibility criteria need to be met).
It is also worth checking https://www.grantfinder.co.uk/funding-highlights/funds/energy/ regularly for other grants.
The tax impact on use of grants is that the value on which monetary allowances are applied is reduced by the amount of the grant.