Homeowners could be taxed on feed-in tariff incomes

Published:  06 September, 2010

Homeowners could face tax implications if they install solar photovoltaic panels in their home, according to accounting and business company Baker Tilly.

Homeowners could face tax implications if they install solar photovoltaic panels in their home, according to accounting and business company Baker Tilly.

“On the face of it, tax law (Section 782A of the Income Tax (Trading and Other Income) Act 2005) exempts micropower generation by domestic systems. However, the income tax exemption is denied if the owner intends the installation to generate substantial surplus electricity. 

"In his 2009 pre-budget report, Alistair Darling proposed extending the income tax exemption to the sale of surplus energy, but there has been no further legislation or consultation on the subject. With more companies offering householders free installation of PV panels, we urge the government to clarify the income tax exemption at the earliest opportunity.

“Where VAT is concerned, the picture is clearer. This income will be subject to VAT if the homeowner is VAT-registered by virtue of other business activities. However, where the homeowner is not VAT-registered it is very unlikely that the income generated by the sale of this electricity would push the owner over the VAT registration threshold (currently £70,000 per year). As such, in most circumstances no VAT would be payable by the homeowner on the sale of the surplus energy.” 

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