Yes it’s true, if you are a business you can get the tax man to pay for about 20% of your renewable energy project! What do you mean you don’t believe me?
Like our friends here, we all like to give the tax man some stick, it’s all we can do after the great ‘Fagan’ has his way with our income. Whether it’s our own pockets or our businesses that he/she has pick pocketed. But it is true, the tax man is your friend on this one.
Our government has signed up to some pretty hefty carbon reduction commitments which are enshrined in legislation, and are legally binding. Because of this the government has set a number of incentives in place to encourage you and I, and our businesses, to reduce our carbon emissions in order for the country to achieve these carbon reduction targets.
Some of these schemes are fairly well known, such as the ‘Feed-in-Tariff (FIT), which rewards you handsomely for installing equipment like solar photovoltaics or wind turbines. These incentives are available for domestic and commercial installations. The other big one at present is the ‘Renewable Heat Incentive’ (RHI). This is currently in place for commercial installations, and will be live for domestic installation in Spring of 2014, according to DECC. If you want more information on those just ask.
However, lesser known, and for businesses only, there are currently two ways to get the tax man to pay for a percentage of your renewable energy investment. Firstly, for a wide range of energy efficiency products you can claim ‘Enhanced Capital Allowances’ (ECA). This allows you to write off 100% of the project cost against the current years corporation tax. So in layman’s terms, if your corporation tax is at 20%, then you will be able to claim back 20% of your project costs at the end of the tax year. There are benefits even if you are not in profit as a business. ECAs though can only be claimed against a specific list of products on the ‘Energy Technology List’ (ETL). This includes many types of products including solar hot water systems, biomass boilers and energy efficient lighting. Check the list for full details. Bizarrely though solar photovoltaics and wind turbines are not on this list.
But, good news! For a two year window, starting 1st Jan 2013, the government have revised some existing legislation that will benefit companies wanting to install solar photovoltaics and wind turbines, among other things. Essentially, in order to stimulate the economy, by encouraging businesses to invest in capital projects, they have raised the amount of capital investment a company can make and still claim 100% of the project cost against the current years corporation tax. Previously this was just £25,000. So effectively, given an average corporation tax rate of 20%, you can claim 20% of your annual capital investments (up to a total of £250,000) against the current years corporation tax. Full details from HMRC.
Best of all, as I understand it, you can claim for any project that qualifies for ECAs on top of the £250,000 limit mentioned above. Now I’m not an accountant, although I know many, so please do check the details with your own accountant.
With the benefit of ‘Feed-in-Tariffs’ and the ‘Renewable Heat Incentive’ investments in renewable technologies already typically provide in excess of 10% return on investment BEFORE claiming the c20% project cost back from the tax man. Which begs the question, when the returns are that good, and the cost of energy so increasingly expensive, why haven’t you invested yet?
If you have a responsibility for cost, energy or carbon reduction in your business, and you are based in the North West, you may want to attend a forthcoming ‘Energy Efficient Finance’ seminar on 11th June. Contact firstname.lastname@example.org for full details or to register your interest.