Navitron Renewable Energy and Sustainability Forum

General Renewable Topics => General Discussion => Topic started by: citrus on January 14, 2013, 10:20:22 AM

Title: Solar install TAX and a benefit in kind
Post by: citrus on January 14, 2013, 10:20:22 AM

I run a small IT company and we looked at doing solar panel installation for the FIT ….. we started with our own personally owned house as it was suitable.

My company paid for the installation and receives the money for the FIT as it is a good investment for my company.

We were looking to do other installs but then the FIT government deal got scaled back and we didnt invest any other money.

Back then  … other companies contacted me for a free install the house (back when the FIT was high)...we would have personally had the free electricity but none of the FIT money.

Now 18months later my accountant is a bit confused and  thinks this free electricity we personally gain from is a “benefit in kind”  …but there would be no such issue if another company had the contract !!

Has anyone had any experience with this topic  ?

Title: Re: Solar install TAX and a benefit in kind
Post by: johnuready on January 14, 2013, 12:08:33 PM
As you had the benefit of your business buying it ie VAT back, paying with non taxed money and writing it down on your books you will have an issue and rightly so.

If this is the case then the FIT will be paid to your business and taxed however your business accounts and the free electricity will be benefit in kind to you and taxed.

Not always a good move to buy with company money, specially if a Ltd company as your accountant will require greater knowledge of your transactions, partner ships, sole trading has more scope to hide bits if you feel it right.

Title: Re: Solar install TAX and a benefit in kind
Post by: citrus on January 14, 2013, 12:24:38 PM
What I cant get my head around tho is that the home residence could have rented the roof for free electricity to any of these sort of companies

With no charges at all.

When the company owning the panels is me  ... then the BIK box is open.

Title: Re: Solar install TAX and a benefit in kind
Post by: BruceB on January 14, 2013, 12:52:38 PM
Remind your accountant he works for you not HMRC!

Not an answer to your precise question, but be aware that there is no income tax to pay. See:

How would the accountant value the benefit in kind?  Arguably you are only getting an incidental benefit as the main benefit of the installation is retained by the company (ie the FIT and export tariff).  To try to charge you a BIK based on 20% of the value of the installation would be unreasonable.  

Why do you not buy the right to use the electricity generated in perpetuity from the company for £1?  Under Pepper vs Hart, the company can charge you based on its marginal cost of letting you have that benefit, which I would argue is zero. And the electricity is worth nothing to the company as they cannot otherwise use or sell it.  That electricity generated is then yours and not the company's so no BIK.

I think of myself as an engineer rather than as an accountant so this advice is worth what you paid for it!

Edited to add:
The HMRC guidance on Pepper vs Hart is here
Arguably as the marginal cost to the company of you having the electricity is zero the BIK is zero.
So you might not even have to pay £1 for it.
That should be enough for your accountant to go on

Title: Re: Solar install TAX and a benefit in kind
Post by: Ted on January 14, 2013, 12:53:14 PM
The BIK angle applies as you are a director or employee (I assume) of the company that owns the panels.  This would not be the case if you had used a third-party roof-rental company to install and own the panels.

In your case the PV panels are a renewables equivalent of a company car.

BUT - AIUI the taxable value to be declared for the BIK is the cost to the company of providing the benefit. In the case of electricity generated from PV panels it could be argued that the cost is zero as it will cost the company no more if 3000 kWh is produced in a year or zero kWh. Try getting confirmation on that from your accountant.

Alternatively you could try arguing that the electricity produced is used entirely (or mainly) by yourself when working from home, in which case it would not need to be declared as a BIK in any case.

Title: Re: Solar install TAX and a benefit in kind
Post by: citrus on January 14, 2013, 01:40:42 PM
good info guys  ... will feed it back.

Title: Re: Solar install TAX and a benefit in kind
Post by: splyn on January 15, 2013, 10:59:47 AM
Ah tax! Don't you just love it?

Imagine paying for your electricity using a similar system, whereby you don't get sent a bill but you're required to send the power company a 'self declaration' form of your usage along with the payment. There would be several tiered standing charge bands, the exact thresholds depending on the age of the person in the household deemed to be the 'main user'. The formulae would change periodically though requiring you to rewrite your spreadsheet each time rather than just enter the new rates.

The per unit rates would depend on what it was used for - one rate for essential use such as refrigeration and cooking, except that used for luxury foodstuffs and desserts which would attract higher rates.

It wouldn't be too bad for most users who would be 'deemed' to use 50% for essentials and a composite rate would apply for the rest. Heavy users however would have to keep detailed records - what you cooked, how long you steamed the asparagus etc. TV usage would be subject to varying rates depending on what you watched - classification lists would be provided by the power company for popular programmes but would refuse to declare the classification of anything not on the list. It would be up to you to declare that the French film you watched came under 'art and culture'; when the power company later decides it should have been classified as 'hard porn' they slap you with a big penalty charge and also declare that at least 65% of your claimed 'news and current affairs' viewing for the last 6 years must have in fact been Hollyoaks because they have the national viewing statistics to prove it and in any case nobody could possibly stick that much Paxman in a week.

Time spent channel surfing would be charged at the rate for the subsequently viewed program providing it doesn't exceed 27 such events in any one 24 hour period totalling no more than 9 minutes 43 seconds.

You'd need inventories of what was in your freezer and when it was bought and consumed so you could apportion the energy use accordingly. Of course you'd only pay for the frozen food electricity usage when an item is removed from the freezer (or the customer moves house), allowing for the additional power used to freeze fresh food when first frozen (if it was already frozen food when purchased this would need to be reclaimed from the supermarket). Indexing tables provided by the power company would be used to account for the changes in electricity prices whilst the item remained frozen. 'Matching rules' would be applied so that if you had more than one bag of peas in the freezer, then you'd be treated as having consumed the newest bag, even if you'd actually eaten the oldest. However, if you replaced the peas with a new bag within 30 days, then you'd have to treat them as not having been consumed at all.

Special, totally unfathomable rules would apply if you replaced the freezer with a more efficient model part way through the year, and God help you if the freezer were to break down and the food temporarily stored in the neighbour's - if there were no precedent you might have to get a ruling from the High Court...

Power used for sex aids, Horlicks whisks and novelty USB foam missile launchers would be deemed of negligible value unless used in pursuance of a business.

Hmm. Can you tell that the self declaration deadline is looming....  surrender:

Title: Re: Solar install TAX and a benefit in kind
Post by: sbchapman on January 15, 2013, 12:06:51 PM
I'm not of the Facebook generation, but sometimes I just wish there was a "Like" button on the forum ......  :)

Title: Re: Solar install TAX and a benefit in kind
Post by: citrus on January 16, 2013, 08:13:51 AM
Thanks for the info on this  ...

Going to use your arguements for the BIK  as  ~zero and look to keep the install within the company (rather than unravelling it all).

Now I have to run a ltd company due to the clients we work for at the moment

In any case  ... effectively my small IT company  ..has started a new business of  "generating and selling electricity’   but only has 1 site (our personal home).

Is there anything else I need to consider  ?

Title: Re: Solar install TAX and a benefit in kind
Post by: joead on October 01, 2019, 12:56:34 PM
Reviving an old thread here, but citrus what was the outcome re BIK?