Solar Energy and The Tax Breaks For It.

For most SMEs, the installation of solar panels to reduce costs and carbon emissions, is a great idea if business premises are owned, or a viable arrangement can be reached with a landlord. In either position, the benefits are considerable.

Vastly reduced energy costs and a major reduction in carbon footprint are the two biggest factors, but it may also be possible to turn solar power into a company profit centre. Plus, there are significant tax breaks available that make the price of installation a more realistic proposition.

How to start

The starting point is to find out if solar power is possible given the particular building location, roof angle, and any shading from trees or tall structures. Based on these factors, system options can be assessed and energy output calculated. It is best to take advice from professionals, and preferably more than one source.

Making assumptions using existing installations as a guide is imprecise because no two situations are the same, and there may be unknown technical considerations. Most installers do not charge for an assessment, so there is nothing to be lost from obtaining recommendations from several specialists to ensure decision making is based on accurate information. It will also help obtain the best price.

One important thing to be aware of is the importance of an energy monitoring package. Not all solar output software systems are equal, and it is one reason to ask for advice from multi sources. In addition, it is essential to obtain comprehensive warranty cover. If there is a problem it is important that the costs are covered by someone else.

 Super Tax Allowance

There are significant business tax breaks for installing solar panels - the 130 per cent Super Deduction and the 50 per cent First Year Allowance. The Super Deduction tax break enables businesses to deduct 130 per cent of the cost of solar equipment and installation from taxable profits. It means that for every £1 invested in solar energy, companies can reduce the tax bill by up to 25p. Information on this from the government’s own website can be found via this link:

https://www.gov.uk/capital-allowances/temporary-first-year-allowances#:~:text=The%20super%2Ddeduction%20lets%20you,from%20your%20profits%20before%20tax.

The 50 per cent First Year Allowance is a bit more complex. Companies that invest in solar panel can pay corporation tax on profit minus half of the value of the equipment installed. It is deducted through capital allowance. For example, if a company invests £300,000 in a solar power system, it is entitled to a 50 per cent capital tax allowance of £150,000. The tax breaks are available to all businesses, regardless of size.

Business Rates Relief

It is sometimes possible to obtain Business Rates Relief from introducing solar panels. This can be as much 100 per cent over five years, though this is not common. Information on this can be found through these links:  https://www.gov.uk/apply-for-business-rate-relief 

https://assets.publishing.service.gov.uk/media/62fceb518fa8f504c1ab9c39/BRIL_5_CARF_Data_Release.pdf 

Smart Export Guarantee (SEG)

This is the icing on the cake of installing solar. Smart Export Guarantee, or SEG as it is known, replaced the Feed In Tariff. Basically, it gives payments to businesses that export unneeded electricity into the national grid. Depending on the productivity of the solar system and energy demand from the business, it can produce a useful resource of revenue. Details are available through this link:

https://www.gov.uk/government/publications/smart-export-guarantee-seg-earn-money-for-exporting-the-renewable-electricity-you-have-generated  

Planning Permission

The majority of business solar installations do not require permission. This is because solar panels are unlikely to protrude more than 200mm from a pitched roof, or be located one meter or less from the edge of a building. The only real stumbling block with planning permission is with listed buildings.

Next steps

The route to getting started is to obtain two or three assessments from installers. The costs and savings benefits can then be analysed along with the tax calculations. If the finance is available then it is usually possible to start profiting from rewards in one or two  months, if not weeks.    

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