Electrical Systems

[robseymour]

I am looking at the merits of installing solar photovoltaic panels to supply electricity to a business. These will attract the governments new Feed In Tariffs which I believe is taxable income to the business. The question I am hoping to answer is whether the cost of the new system would qualify for capital allowances.

According to the Carbon Trust Enhanced Capital Allowances don't apply to this technology (only Solar Thermal). However with 'Electrical Systems' being treated as 'Integral features' it may be the possible for many businesses to use their Annual Investment Allowance to similar effect. As I see it it will turn on whether the Solar PV generating system itself counts as an 'Electrical System' under these rules. I find the definition of 'Electrical Systems' in the literature to be a little ambiguous:

"a system for taking electrical power (including lighting) from the point of entry to the building or structure, or generation within the building or structure, and distributing it through the building or structure, as required."

Would anyone like to comment on whether this means that the 'Electrical System' would only include the means to distribute the power (wiring, fusebox etc) and not include any equipment for generating it (i.e. the panels themselves)?

Any help would be most appreciated

regards

Rob

[robbob]

Hello rob

Have you asked the supplier or the manufacturer?
I would imagine if they qualify for enhanced or integral writing down allowances then i would suspect they highlight this in the sales literature so as to boost sales.

Unfortunately due to the complexity of these items i only tend to look on a need to know basis so other than this suggestion i am unable to help much

[dunhamsjd]

Rob,

Try looking at it from another angle.
The panels generate electricity that is either used in your business and/or sold to the Grid. Therefore you could consider yourself to be an electricity generator/supplier and the panels represent the equipment used to generate/supply the electricity in the same way as one of the utility companies would. The panels could therefore be regarded as plant & machinery used for the business and should be eligible for capital allowances. It also then follows that the panels do not fall into the categories for integral features and would be added to the main pool and/or be eligible for the AIA.
Hope this helps?

[Incredulum]

Would anyone like to comment on whether this means that the 'Electrical System' would only include the means to distribute the power (wiring, fusebox etc) and not include any equipment for generating it (i.e. the panels themselves)?

Yes, that is exactly what it means. However, it does not preclude the electricity generation machinery from being plant in its own right - it merely does not get stuck in the integral features legislation.

However, it is probably a long life asset.

[robseymour]

[quote="robbob"]
Have you asked the supplier or the manufacturer?
I would imagine if they qualify for enhanced or integral writing down allowances then i would suspect they highlight this in the sales literature so as to boost sales.

Thanks for answering robbob

Suppliers of the the equipment seem a little unsure themselves. I have seen some claiming ECA on Solar PV (so as the boost sales?) but having checked with the Carbon Trust and solar PV is specifically not on the list. That is why I am trying to get the answer from the tax people.

Thanks again

[robseymour]

Rob,

Try looking at it from another angle.
The panels generate electricity that is either used in your business and/or sold to the Grid. Therefore you could consider yourself to be an electricity generator/supplier and the panels represent the equipment used to generate/supply the electricity in the same way as one of the utility companies would. The panels could therefore be regarded as plant & machinery used for the business and should be eligible for capital allowances. It also then follows that the panels do not fall into the categories for integral features and would be added to the main pool and/or be eligible for the AIA.
Hope this helps?

That is a good suggestion dunhamsjd I am seen something similar on a landlords forum and this might have legs. Thanks for posting

rob

[robseymour]

Would anyone like to comment on whether this means that the 'Electrical System' would only include the means to distribute the power (wiring, fusebox etc) and not include any equipment for generating it (i.e. the panels themselves)?

Yes, that is exactly what it means. However, it does not preclude the electricity generation machinery from being plant in its own right - it merely does not get stuck in the integral features legislation.

However, it is probably a long life asset.

Thanks for the post. By long life asset I assume that you mean the write down would be 10% if not used against AIA. Would electrical generation equipment always have been considered plant for any business that installed it?

[Incredulum]

Would electrical generation equipment always have been considered plant for any business that installed it?

Yes. I suspect that might not be the case if you have a residential property (residential properties not qualifying for capital allowances), unless you can argue that there is a separate trade of electricity generation.

[Generix]

Would electrical generation equipment always have been considered plant for any business that installed it?

Yes. I suspect that might not be the case if you have a residential property (residential properties not qualifying for capital allowances), unless you can argue that there is a separate trade of electricity generation.

If your into electricity generation then don't forget about the indirect tax implications