Tuesday, 28 May 2013

Paying Tax On YOUR Feed in Tariff Income?

Wherever you live in the world, you'll be aware of the global recession. 
Poor growth has already led to two international credit rating agencies stripping the UK of its top-notch triple-A rating. The Chancellor must be desperate to identify another source of income, before he cuts further public services. 

I'm just hoping that he's not looking at southern Europe for ideas, but reports in the press suggest that DECC will bear the brunt of cuts. Link to report

Is the revenue you're receiving safe?
Unless you're "Goldman Sachs" and you've negotiated a 'Sweetheart' deal, her Majesty's Revenue and Customs (HRMC) service will take an active interest in clawing back a share of any income you make; however you made it.

A disturbing trend seems to be developing throughout Europe to retrospectively impose a tax on any earnings from FiT payments. Spanish, Greek and Belgium authorities are all actively introducing, or considering a tax or levy. 

Feed-In Tariffs were introduced on the 1 April 2010 by the Labour government and replaced UK government grants as the main financial incentive to encourage uptake of renewable electricity-generating technologies. It seems worthwhile mentioning why this scheme was introduced 

This wasn't based on Tony Blair's 'Green credentials'.

Back in 2008, the EU set three parallel targets for 2020: 

  1. Cut emissions by 20% from 1990 levels.
  2. Deliver at least 20% of its energy from renewable sources
  3. increase energy efficiency by 20%
The recession and slowdown of global economies have made these targets simpler, yet more difficult to achieve. Lower factory output has reduced emissions, but reduced profitability has reduced the will to make output 'greener'.

Installers in the UK regularly make claims of 10%-14% tax-free returns by fitting PV panels on your roof and taking advantage of a FiT scheme My figures for 2011-12 confirm this, I managed 12.5% and was delighted. The poor summer in 2012 and the late spring in 2013 will mean I won't achieve that this year, but it will certainly be over 10%, which in comparison to the interest levels offered by banks and building societies seems great.

Would it influence decisions?
Would I have invested £10,000 in June 2011 if I knew I'd have to pay 6% tax on my FiT payments? Probably not. 
Did I assume that the "guaranteed" FiT payments would remain as they were for the 25 year lifetime of my contract? Probably not again.

What I hadn't factored in was the length and depth of the recession and the affect on ordinary householders like myself. I was always aware that it was a generous scheme and sometimes the phrase "too good to be true" comes back to bite you.

I just hope the George Osborne finds the cash he needs down the back of the sofa and we can all sleep at little easier...

Twitter: (@solaricarus)

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