Farmers can double tax benefits by choosing renewables?

Farmers yet to take full advantage of their Annual Investment Allowance (AIA) should consider renewables as a way of doubling the potential benefits, according to an independent solar panel installer.

Six months after the Chancellor announced he would be increasing the annual allowance for qualifying capital expenditure to £500,000, EvoEnergy is calling on agricultural firms to widen their approach and consider clean energy generation such as solar.

Thanks to the Government’s incentive aimed at driving business growth, businesses can benefit from immediate 100 per cent tax relief until the end of 2015 on up to £500,000 spend on plant or machinery, including solar PV.

For a farm owner paying 20% corporate tax, this acceleration means as much as £100k on large investments can be offset against tax in year one.

By choosing renewables, farmers can also benefit from improved green credentials in the eyes of their customers and the Government’s 20-year Feed-in Tariff (FiT), which guarantees to pay a set rate for every unit of electricity generated.

Steve Wilks, director of finance for EvoEnergy, said: “This enhanced tax break is a welcome move from the Government, but for many firms the biggest challenge is actually being able to make the most of it.

“The beauty of solar, especially when installed on a barn or shed roof perhaps, is that by simply putting previously dead space to good use, farmers can maximise their tax breaks, earn money on self-generated energy, and cut their bills too.

“The greater a farm’s electricity usage, the higher the potential savings through solar. Often businesses find that they can use 100 per cent of their self-generated electricity on site while still also earning the FiT payment for this electricity.

“For example, a 250kWp solar system costing around £250k before AIA could return £20k each year in FiT income and a further £20k in energy savings if 100 per cent of it is consumed on site.

“This represents a significant amount of money added back on to the bottom line and for a farm owner this improvement of EBITDA can enhance the long term valuation of their business.”

Craig Simpson, National Head of Corporate Tax for Baker Tilly, said: “Many of the businesses we work for tell us that finding suitable investment opportunities to benefit fully from the AIA can be difficult.

“Renewables are one way for farms to do just that - allowing them to bring forward the tax benefits while enjoying the stability of returns over the long-term as well.”