HM Revenue & Customs has launched a consultation on proposals to minimise the availability of Capital Allowances for 'green' installations harnessing renewable energy.

The previous Labour government introduced a range of measures to encourage homeowners and businesses to embrace renewable energy production: simply put, they guaranteed income to people - including homeowners - for every unit of energy produced, and for a period of up to 25 years.

This was a significant financial incentive for people to adopt green energy in their own homes or businesses, because it promised a long-term commitment to offset the substantial capital costs of installing wind turbines, solar panels, and the like.

In contrast, the current government has brought forward/initiated 'reviews' of the tariffs due under the regime, and it appears that the underlying agenda is to reduce the cost of the incentives - although it should be borne in mind that the guaranteed tariffs for green energy are supposed to be paid by the energy companies so the cost is effectively borne by their customers, rather than the government.

Nevertheless, these new proposals will limit the Treasury's collateral exposure in terms of claims for tax relief through Capital Allowances, as follows:

• Any installation that is eligible for either the Feed-In Tariff, or the Renewable Heat Incentive, will not be eligible for the immediate 100% Enhanced Capital Allowances for energy- or water-saving plant and machinery.
• Any installation that is eligible for general Capital Allowances will only rank for the lower 'special rate' pool, where the allowance is currently just 10% - and set to fall to just 8% per annum from April 2012. (The normal 'main pool rate' is currently 20%, due to fall to 18% next year).

Further details can be found at Capital Allowances: Feed-In Tariffs and The Renewable Heat Incentive

Which just goes to show that changing your logo to a tree, does not necessarily make you 'green'.

Article Added Saturday, 04 June 2011 | 1448 Hits

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