Tax boost for so­lar PV farm­ing

Irish Examiner - Farming - - FARM FINANCE - Kieran Cough­lan www.cough­lanac­count­ing.com

The Na­tional Plan­ning Frame­work for Ire­land 2040 sug­gests that up to 40% of our elec­tric­ity will come from from re­new­able sources by 2020, with strate­gic aims of over 50% by 2030, and more by 2040.

So­lar PV of­fers just one of the re­new­able en­ergy op­tions, oth­ers in­clude wind, wave, biomass and hy­dro sources.

Ac­cord­ing to the Sus­tain­able En­ergy Author­ity Of Ire­land, Ire­land has a na­tional tar­get to re­duce en­ergy de­mand by 20% of the av­er­age en­ergy use dur­ing the pe­riod 2000–2005, through en­ergy ef­fi­ciency mea­sures, and has a bind­ing EU tar­get for re­new­able en­ergy use to be 16% of fi­nal en­ergy use, and 10% of en­ergy use in the trans­port sec­tor, by 2020. From a stand­ing start in 2005, Ire­land had gone some way to reach­ing its tar­gets, with a re­duc­tion of about 8.6% of fi­nal en­ergy con­sump­tion by 2015, and about 10% of our en­ergy con­sump­tion from re­new­ables in 2017. Over­all en­ergy us­age in Ire­land con­tin­ued to de­cline from highs in 2008 of about 16 Mtoe (mil­lion tonnes of oil equiv­a­lent) to near 13 Mtoe in 2014, but an up­ward us­age tra­jec­tory has started, in line with our eco­nomic re­cov­ery. Ire­land’s eco­nomic growth con­tin­ues to ac­cel­er­ate, by 5.2% in 2016, 5% for 2017, and an ex­pected 4.2% for 2018. As the econ­omy im­proves, it be­come much more dif­fi­cult to at­tain the tar­gets of re­new­able en­ergy use and re­duc­ing en­ergy con­sump­tion. Fail­ing to meet th­ese tar­gets could cost us hun­dreds of mil­lions.

It was widely ex­pected that the Gov­ern­ment would Char­tered tax ad­viser Kieran Cough­lan, Bel­go­oly, Co Cork. (086) 8678296

en­hance its sup­port for so­lar re­new­able projects through a “REFIT” tar­iff scheme like that in place for decades, which was mainly taken up by wind en­ergy projects, whereby elec­tric­ity pro­duc­ers are paid a sub­sidised price.

In the past week, Min­is­ter De­nis Naugh­ten said the fi­nal ver­sion of the Re­new­able Elec­tric­ity Sup­port Scheme is ex­pected to re­ceive Gov­ern­ment ap­proval within months.

This will be fol­lowed by a for­mal ap­pli­ca­tion for EU State Aid ap­proval. So­lar en­ergy is just one of the tech­nolo­gies which can be em­ployed to meet our tar­gets. In Ger­many, elec­tric­ity pro­duc­tion from so­lar, wind and bio-mass amount to 7%, 18.8% and 8.7%.

At the end of 2016, only 0.01% of Ire­land’s elec­tric­ity con­sump­tion came from so­lar PV, but the num­ber of so­lar farms for which plan­ning has been ap­plied for and achieved in­creased ex­po­nen­tially over the past cou­ple of years.

So­lar projects for which plan­ning has been re­ceived are be­lieved to be ca­pa­ble of gen­er­at­ing 700MW, suf­fi­cient to power 100,000 to 140,000 homes, with al­most three t i m e s th is am o u n t in the im­me­di­ate plan­ning pipe­line. So­lar projects have now got a boost from the tax­man, with farm­ers be­ing in a po­si­tion to pass on their farms while ben­e­fit­ing from Agri­cul­tural Re­lief, thanks to changes in­tro­duced by the Fi­nance Act 2017 passed last De­cem­ber.

Sub­ject to cer­tain con­di­tions, land in a gift or an in­her­i­tance, on which so­lar pan­els have been in­stalled, is to be re­garded as qual­i­fy­ing agri­cul­tural land for the pur­poses of the tax re­lief. Along with all the usual cri­te­ria which must be sat­is­fied, lands oc­cu­pied by so­lar pan­els can po­ten­tially qual­ify for Agri­cul­tural Re­lief where less than 50% of the land is oc­cu­pied by so­lar pan­els and an­cil­lary equip­ment. In ad­di­tion, sub­ject to con­di­tions, the ‘ac­tive farmer’ re­quire­ments can be met where a ben­e­fi­ciary leases land for the in­stal­la­tion of so­lar pan­els.

While the rental in­come at­tain­able for en­gag­ing in long term leases with so­lar de­vel­op­ers has made such pro­pos­als lu­cra­tive, the longterm tax con­se­quences of en­ter­ing a so­lar con­tract can put some land own­ers off such projects.

Of course, there are other tax im­pli­ca­tions, such as Cap­i­tal Gains Tax, Stamp Duty, VAT and In­come Tax, which have not changed in the most re­cent Bud­get and Fi­nance Act, and must be con­tended with in or­der to avoid pit­falls.

But at least the changes on the Agri­cul­tural Re­lief front give clar­ity and sup­port for so­lar projects. In­di­vid­u­als should ob­tain pro­fes­sional ad­vice rel­e­vant to their in­di­vid­ual cir­cum­stances.

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