Tax treatment of Feed-in Tariffs (FITs) and Solar Panels

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The Feed-in Tariffs (FITs) scheme was introduced on 1 April 2010, under powers in the Energy Act 2008.  There are three financial benefits from FITs:

Generation tariff – the electricity supplier of your choice will pay you for each unit (kilowatt) of electricity you generate.

Export tariff – if you generate electricity that you don’t use yourself, you can export it back to the grid. You will be paid for exporting electricity as an additional payment (on top of the generation tariff)

Energy bill savings – you won’t have to import as much electricity from your supplier because a proportion of what you use you will have generated yourself

Feed-in Tariff exemption from tax

Generally the feed-in tariff is taxable income for the individual or company receiving the income.

There is an exemption that applies from tax year 2007-08 from the tax charge where an individual generates electricity mainly for use in their own home.   The actual exemption wording is found in Income Tax (Trading And Other Income) Act 2005.

The specific details of the exemption and many related issues can be found in our new report “Tax treatment of Feed-in Tariffs (FITs) ” which you can download here [download id=”8″]

The report describes when Feed-in Tariffs are taxable as business income (with capital allowances available); taxable as miscellaneous income or exempt from tax.  The report also gives some information relating to VAT on solar panels and Feed-in Tariff.

Important notice

The above report is given as generally and publically available information not as tax advice.  For specific circumstances it is strongly advised that professional tax advice is obtained prior to taking or refraining from any action.

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