Overall, capital allowances on solar panels can provide a valuable tax relief for businesses investing in renewable energy and can help to reduce the cost of transitioning to a more sustainable and energy-efficient business model. The Government is offering tax breaks for the installation of solar panels until 31 March 2023.
Capital allowances on solar panels are tax deductions that businesses can claim on the cost of installing solar panels in commercial properties. The UK government offers tax relief in the form of capital allowances to encourage businesses to invest in renewable energy and reduce their carbon footprint.
In this article, Nicola Parkinson and Kathryn Brook, specialist lawyers from Walker Morris’ Tax and Infrastructure & Energy teams respectively, highlight potential tax issues associated with solar farm developments.
Therefore, your new taxable profit is £150,000. You decide to buy a solar PV system for £100,000. You have claimed much less than £1 million for capital allowances this year, so you are still eligible for AIA. Therefore, 100% of that cost can be used to write back your taxable profit. Consequently, your new taxable profit will only be £50,000.
It is the biggest two-year tax cut in British history. To claim their tax break, Businesses must invest in qualifying plant and machinery by 31 March 2023. Solar Panels are qualifying assets under the 50% First Year Allowance.
For a company investing £100,000 in a solar PV system, the super-deduction allows for a tax expense of £200,000 for tax calculation, resulting in a taxable liability reduction of £70,000.