Restrictions on capital allowances on plant or machinery to generate electricity or heat

News: September 2012

Restrictions on capital allowances on plant or machinery to generate electricity or heat

If your business invests in plant or machinery to generate electricity or heat (or to produce biogas or biofuel) that attracts a Feed-in Tariff (FiT) or tariffs under the Renewable Heat Incentive (RHI), watch out for new rules:

Firstly, expenditure on solar panels is redesignated so that, for capital allowances purposes, only the 8% annual tax allowance applies.

Secondly, the 100% tax write-off as energy-saving plant and machinery is specifically not available where tariff payments are received under either of the renewable energy schemes introduced by the Department of Energy and Climate Change (DECC) – FiTs or the RHI.

The restrictions apply to expenditure incurred on or after 1 April 2012 (corporation tax) or 6 April 2012 (income tax). However, for expenditure on combined heat and power equipment (CHP) only, the unavailability of the 100% tax write-off will only apply to expenditure incurred on or after 1 April 2014 (corporation tax) or 6 April 2014 (income tax).

Careful planning can reduce the impact of these measures. Please contact us for more details if you are likely to be affected.