If your business invests in plant or machinery to generate electricity or heat (or to produce biogas or biofuel) that attracts a Feed-in Tariff (FiT) or tariffs under the Renewable Heat Incentive (RHI), watch out for new rules:
Firstly, expenditure on solar panels is redesignated so that, for capital allowances purposes, only the 8% annual tax allowance applies.
Secondly, the 100% tax write-off as energy-saving plant and machinery is specifically not available where tariff payments are received under either of the renewable energy schemes introduced by the Department of Energy and Climate Change (DECC) – FiTs or the RHI.
The restrictions apply to expenditure incurred on or after 1 April 2012 (corporation tax) or 6 April 2012 (income tax). However, for expenditure on combined heat and power equipment (CHP) only, the unavailability of the 100% tax write-off will only apply to expenditure incurred on or after 1 April 2014 (corporation tax) or 6 April 2014 (income tax).
Careful planning can reduce the impact of these measures. Please contact me for more details if you are likely to be affected.