VAT ON SALE OF SOLAR ELECTRICITY

[agbrfas]

Are there any special rules relating to sale of generated electicity (a) to a business (tenant of the building with PV panels) or (b) to the National grid? Otherwise I'm assuming that the normal rules apply - registration optional up to £80,000 turnover. I'm also assuming the rate would be 5% not 17.5%.

Thanks for your help.

[agbrfas]

Thanks for this. On the main question of VAT, I have now found out that the client will be funding a large part of the capital (fairly obviously) from Government Grants. As these are normally "out of scope" of VAT does this mean that partial exemption appotionments will apply?

[Generix]

Thanks for this. On the main question of VAT, I have now found out that the client will be funding a large part of the capital (fairly obviously) from Government Grants. As these are normally "out of scope" of VAT does this mean that partial exemption appotionments will apply?

Outside the scope is very different to exempt

exempt = input VAT restriction

Pushed for time atm but will get back to you later with more details on your query.

[Generix]

Thanks for this. On the main question of VAT, I have now found out that the client will be funding a large part of the capital (fairly obviously) from Government Grants. As these are normally "out of scope" of VAT does this mean that partial exemption appotionments will apply?

Outside the scope is very different to exempt

exempt = input VAT restriction

Pushed for time atm but will get back to you later with more details on your query.

If grants are outside the scope of VAT then they won't count towards turnover threshold, and have no partial exemption implications (that I can immediately think of in your circumstances). Unless you're generating some serious leccy then I think you'll be under the threshold - agree?

[agbrfas]

Thanks, Generix. Yes it would only be a volountary registration, but if the grant income is ignored, the client would charge 5% on sales of electricity and claim back VAT on all the costs of installation, becoming a net recipient from HMRC. As the customers are probably VAT registered, they may not have a problem with the tax charge on the supply. Or am I missing something?

Thanks very much for your help -

[Generix]

Thanks, Generix. Yes it would only be a volountary registration, but if the grant income is ignored, the client would charge 5% on sales of electricity and claim back VAT on all the costs of installation, becoming a net recipient from HMRC. As the customers are probably VAT registered, they may not have a problem with the tax charge on the supply. Or am I missing something?

Thanks very much for your help -

Off the top of my head I can't remember the conditions for the 5% leccy, but otherwise your logic is sound.

One point is that HMRC might challenge this as a business not actively/earnestly pursued (maybe?) and also you might want to check whether the grant still applies if the panels become part of a business venture?