Tax Information

 Capital Allowances

Any business will receive 100% tax relief, in the year of purchase, on the first £25,000 of capital expenditure, under the Annual Investment Allowance (“AIA”) Scheme. Provided, therefore, that you have no capital expenditure on other items within your business, this means that the first £25,000 of the cost of your PV panels can be immediately written off against taxable profits. However, if your annual AIA £25,000 limit has already been exceeded via expenditure on other capital items, then annual capital allowances of just 18% of the cost of the PV panels, are allowed in the first year.

Example 1
A limited company pays £20,000, net of VAT, for a PV panel installation, in the year to 31 March 2013, and has not used up it’s £25,000 AIA allowance on other capital expenditure. It pays corporation tax at 24% in that year.

Amount available for annual capital allowances = £20,000.

Amount to offset against corporation tax liability = £20,000 x 24% = £4,800.

Example 2
A limited company pays £20,000, net of VAT, for a PV panel installation, in the year to 31 March 2013, and has already used up it’s £25,000 AIA allowance on other capital expenditure. It pays corporation tax at 24% in that year.

Amount available for annual capital allowances = £20,000 x 18% = £3,600.

Amount to offset against corporation tax liability = £3,600 x 24%= £864.

In both examples shown above, capital allowances are eventually received against the full £20,000 expenditure, but the allowances are received far more quickly in example 1.

VAT Implications

Whilst VAT is only chargeable at 5% on domestic installations, the standard 20% rate applies to commercial installations. However, most businesses will be VAT registered, and therefore can reclaim the VAT amount applied to installation costs.

For a VAT registered business, VAT will be added to any export tariff amounts you receive, but not to the Feed in Tariff payments.

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Watt-NRG did a great job on our installation; they were prompt, tidy and efficient. After a year, the installation is out-performing the generation promises with no problems. Very pleased.