Solar PV Prices Slashed After FIT Change

thenudeone

wuthton wrote: »

Exactly and as the RAR companies are giving the goods to the end user no VAT is paid.

I have no idea whether they are complying or not, but VAT must be accounted for on the supply of goods, not just the sale of goods.

there are limited exemptions for small promotional materials, but VAT should still be paid to HMRC when free of charge goods are supplied.

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000088&propertyType=document#P64_5748

2.9 Do I still have to account for VAT if no money is paid?
It depends. If you provide genuinely free services there is no VAT. Free goods are treated a bit differently. If you occasionally give away to different people an item from stock that has cost you less than £50, there is no VAT. You must account for VAT on all other goods which you provide free of charge

SallyKing

wuthton wrote: »

Exactly and as the RAR companies are giving the goods to the end user no VAT is paid.

I've been trying to think of another example of a business that gives away valuable goods and doesn't charge consumers anything but have failed to come up with any.

Do the rar companies give you ownership of the panels? I thought it was just the electricity that you got for free and the rar company still own the panels?

Just curious - do rar companies pay taxes the same as any other business, or do they get special treatment for being 'green'?

larkim

For VAT purposes, their inputs are the costs of the products themselves which I expect are supplied with VAT added. Their ability to offset that VAT with an output reclaim based on some sales. I doubt they have that sales income; their income is the FiT which isn't (AFAIK) affected by VAT.

So the RaR companies are in the same position as consumers like thee and me - no VAT to reclaim. RaR companies will get better purchasing advantages and won't be supplying staff to themselves at a mark up!!

Matt

Cardew

Mickeyfin wrote: »

As a new contributor, I'd like to add another related comment.

I just did an exercise on my current Electricity use and costs and factored in the now accepted 25% reduction in electricity use in using a 3.2kw SPV array plus cost/returns of other energy saving measures in my home eg changing lighting system.

The calculation sheet also shows the rate per Kwh from my present supplier. When I recalculated my energy costs with the reductions, I found my rate per Kwh increased by 8%. I then 'doubled' my current use and found the rate/Kwh decreased by a whopping 12%.

I tried this with a number of different suppliers and tariffs with similar results. I have not seen where this is factored into the new (or old) FITs Calculations I have looked at to date and while this energy pricing regime exists it must only further discourage energy saving measures including the now paltry returns on SPV's.

Welcome to the forum.

Firstly you are incorrect in stating the "now accepted 25% reduction in electricity use". IMO you are referring to the "now accepted 25% of generated electricity is used in the house".

e.g. if your panels produce, say 2,800kWh pa, you use 700kWh in your house.

In my all electric house I use, say, 20,000kWh pa. Using your definition would mean I would save 5,000kWh pa - which would be difficult if you only generate 2,800kWh pa.

Secondly explained in post #21 the rate per kWh has no relevance.
The Tier 1 allocation of high priced units is in effect a standing charge( as would be a tariff with a daily standing charge).

Taking the car analogy in post 21, say you had standing costs of £1000 pa(tax, insurance maintenance) and spent £1000 pa on petrol for 5,000 miles pa your cost per mile would be 40p

Cut your mileage by 50% to 2,500pa your cost per mile would be 60p.

larkim

larkim wrote: »

For VAT purposes, their inputs are the costs of the products themselves which I expect are supplied with VAT added. Their ability to offset that VAT with an output reclaim based on some sales. I doubt they have that sales income; their income is the FiT which isn't (AFAIK) affected by VAT.

So the RaR companies are in the same position as consumers like thee and me - no VAT to reclaim. RaR companies will get better purchasing advantages and won't be supplying staff to themselves at a mark up!!

Matt

Actually, thinking about this overnight it might be the case that RaR installers can recover the input VAT on purchases. If their business is the supply and installation of solar panels, both under the RaR schemes (where they end up owning the panels for 25 years) or under normal installation routes, then I wouldn't expect that they only recover input VAT on the "normal installations", they should recover the VAT on the RaR panels too. The analogy is capital expenditure on machinery in a "normal" environment - business recover the VAT on capital expenditure as their capex is spent on assets which they trade with; no different than panels under a RaR scheme in essence.

Matt

zeupater

larkim wrote: »

Actually, thinking about this overnight it might be the case that RaR installers can recover the input VAT on purchases. If their business is the supply and installation of solar panels, both under the RaR schemes (where they end up owning the panels for 25 years) or under normal installation routes, then I wouldn't expect that they only recover input VAT on the "normal installations", they should recover the VAT on the RaR panels too. The analogy is capital expenditure on machinery in a "normal" environment - business recover the VAT on capital expenditure as their capex is spent on assets which they trade with; no different than panels under a RaR scheme in essence.

Matt

Hi

Ref post #18 on this thread .....

HTH
Z

wuthton

&

zeupater wrote: »

Hi

The RaR companies are the end user, they become liable for the VAT as they retain title to the systems which become capital assets on their books, for which they will be able to claim capital investment tax relief ...

HTH
Z

If they are VAT registered they can claim the VAT back regardless of whether it is a box of paper clips or a large capital investment.

I'm unaware of any business tax relief that has any bearing on VAT payments or collections.

larkim

zeupater wrote: »

Hi

Ref post #18 on this thread .....

HTH
Z

Agreed, but (as a chartered accountant!) I'm not sure that that post is entirely right. Does the RaR company get benefit of the export tariff as well as the feed in tariff? The export tariff as I understand it is a vatable supply, so on the purchase of a capital asset which is used to generate a vatable supply a vat registered purchaser would be able to reclaim the vat.

http://www.hmrc.gov.uk/manuals/vatscmanual/vatsc05220.htm advises.

I agree that capital allowances against corporation tax liabilities are likely to arise (as indeed the FiT and export tariff income are liable to charges of corporation tax).

Matt

zeupater

wuthton wrote: »

&

If they are VAT registered they can claim the VAT back regardless of whether it is a box of paper clips or a large capital investment.

I'm unaware of any business tax relief that has any bearing on VAT payments or collections.

Hi

Do they do this by offsetting it against the VAT received from sales to a downline customer ? .... if so, what sales, as they have no direct customers, only suppliers (materials, labour and roof leases), apart from the FiT partner(s) .... do they receive this as a special form of dispensation ? ..... I'm really interested as I was under the impression that without offsetting the capital against sales (possibly FiT payments ?), the following guidance from HMRC would apply ....

'Value Added Tax (VAT)

The purchase price of an asset on which you can claim capital allowances sometimes includes VAT. If you are registered for VAT and can offset that VAT against your output tax when you make your VAT returns, you should only claim capital allowances on the net cost of the asset.'

Do you have a link ? ......

Z

zeupater

larkim wrote: »

Agreed, but (as a chartered accountant!) I'm not sure that that post is entirely right. Does the RaR company get benefit of the export tariff as well as the feed in tariff? The export tariff as I understand it is a vatable supply, so on the purchase of a capital asset which is used to generate a vatable supply a vat registered purchaser would be able to reclaim the vat.

http://www.hmrc.gov.uk/manuals/vatscmanual/vatsc05220.htm advises.

I agree that capital allowances against corporation tax liabilities are likely to arise (as indeed the FiT and export tariff income are liable to charges of corporation tax).

Matt

Hi

That's why I'm interested .... surely the VAT would either be paid and sit on their books as part of the asset value, or sit there as VAT due to be paid as the revenue from the FiT/Export payments arrive every four months and therefore be chased up by HMRC ..... unless there is a special dispensation to claim the VAT back from nowhere, where's the double entry on the books ?

Z