PV FIT and Tax free income

car-mark

Hi there

Very new question so please be relatively gentle. On another forum I have established that the "tax free" income from solar PV FIT is limited to 1.2 times your electricity usage in the eyes of HMRC. This Forum ran out of expertise with regards to means tested benefits and the affects of this income. So the question is.

If you are a carer recieving carers allowance and working part time up to the maximum within your tax free allowance. Does your income from solar PV FIT affect this, will this income reduce the carers allowace you receive or bring you into a taxable level.

Yours Car-mark

Cardew

Welcome to the forum.

Presumably the FIT income would be in the same category as tax free income from an ISA or Premium Bond win.

As the latter examples have been in existence for many years, a precedent would(should) be set.

P.S.
Do not understand your statement about 1.2 times your electricity usage! All the FIT income is tax free regardless of your electricity spend.

car-mark

Hi there
The 1.2 comes from this location. As a newbie the system does not allow me to post a link: [FONT=&quot]hmrc.gov.uk/manuals/bimmanual/BIM40520.htm[/FONT]
Hope this posts the previous attempts did not
yours car-mark

WestonDave

Be careful interpreting that - its fairly clear that its talking about the amount of electricity generated not being much in excess of electricity used, not that the income from FIT's is not much in excess of the costs of electricity. The distinction is important especially for those on 43p FIT's because you will earn 43p per unit generated but only spend say 10p per unit used. Very few Solar PV instalations will even approach providing enough units of electricity to supply all that is used (even if on a time shift basis where they sell some during the day and buy some at night) so in effect very few Solar PV systems will interest HMRC to the extent they probably won't ever bother looking!

Hungerdunger

I've been wondering about this for a couple of weeks since I came across the HMRC document referred to above.

In my case I've installed a 9.5kWp ground-mounted system, and as a lot of our heat and hot water is generated by a Rayburn and wood burning stove then it appears that I'm way above that 20% figure.

First of all, it's funny that none of the companies who quoted for this job mentioned this complication - in fact all their literature mentioned the usual tax free advantages. I wonder whether any of them were actually aware of it, and if not, whether HMRC should have made it clear.

Secondly, what about a family who lived in a large house run completely by electricity? They could install a system similar to mine and, depending on their profligacy, could probably claim they didn't exceed the 20% figure.

It all sounds rather messy, but I wonder whether HMRC has the will and the resources to check how much electricity each household uses compared to their production.

car-mark

Thanks Hungerdunger for your post, I suppose I have to think myself lucky as my situation is similar to yours. But my heating system is all electric in a large bungalow. Having digested the HMRC document it looks full of holes with regards to application, unfortunately I am sure they can rewrite it in their favor.

yours car-mark

Martyn1981

car-mark wrote: »

Thanks Hungerdunger for your post, I suppose I have to think myself lucky as my situation is similar to yours. But my heating system is all electric in a large bungalow. Having digested the HMRC document it looks full of holes with regards to application, unfortunately I am sure they can rewrite it in their favor.

yours car-mark

I found the 120% rule last year when I was considering PV. I understood it to be a (weak) attempt at setting some sort of backstop to ensure that domestic PV is understood to be micro-generation and primarily aimed at the householder taking some responsibility for their own electrical demand and consumption.

I think the rule compares well to tax free ISA's. The government sees them as desirable to encourage savings, but only up to a particular value / annual investment limit. So you can invest in domestic PV tax free, but if you 'go too far' then the government wants its slice of what becomes a small business.

Interestingly, when Wifey and I went for PV, we stretched ourselves, and added a second 1.2kWp system to the planned 2.4kWp. This was to help meet (take responsibility for) our demand of 2,700kWh's pa. We were quoted 2,640kWh's pa generation using the Sheffield research numbers, but now having researched this further, and used PVGIS climate for Cardiff, the estimation is now 2,950kWh's or about 110% of pre PV demand.

Had our systems been South (not ESE) then we'd be exceeding 120%, 10% more again if we had bigger roofs and had been able to install 4kWp.

I doubt HMRC would have been interested in us, however, since our ratio is only high due to pretty low demand. It would only be fair to compare to an average household, which I believe is around 4,000kWh's pa, giving a nominal 120% point of interest at around 5,000kWh's?

Personally I think a percentage rule is nonsense, HMRC if they ever intend to enforce this (they may have no interest to be honest) need to set a specific generation figure, such as the above 5MWh's. Otherwise we can simply waste export to force up our own consumption and re-balance the calculation. Now that would be a shameful waste.

Mart.

WestonDave

I wonder if this is simply a case of something which hasn't been updated recently. If it was provided before the advent of FIT's and more importantly before the grade D EPC requirement it could act as a disincentive to efficiency savings.

However it is only guidance to inspectors and it does clearly state that "The term significantly exceed is not defined in ITTOIA/S782A and should be considered by reference to the particular circumstances". I think if you were in a situation where your excess generation was simply a function of energy efficiency rather than trying to run a business, and that you were within the 4kwp limit which is clearly designed to encourage household installs, then you'd have a good case even if you breach the 120% limit.

As I said last night I suspect that on 4kwp systems HMRC has better things to do than start poring over consumption figures from systems to work out the amount of Kwh generated compated to that used in order to work out the 120% limit. If on the other hand during a general investigation into your affairs they spot ridiculous levels of income from FIT's then they might look closer.

Fruit_and_Nut_Case

car-mark wrote: »

Hi there
The 1.2 comes from this location. As a newbie the system does not allow me to post a link: [FONT=&quot]hmrc.gov.uk/manuals/bimmanual/BIM40520.htm[/FONT]
Hope this posts the previous attempts did not
yours car-mark

Here you go...
http://www.hmrc.gov.uk/manuals/bimmanual/bim40520.htm

Cardew

WestonDave wrote: »

I

As I said last night I suspect that on 4kwp systems HMRC has better things to do than start poring over consumption figures from systems to work out the amount of Kwh generated compated to that used in order to work out the 120% limit. If on the other hand during a general investigation into your affairs they spot ridiculous levels of income from FIT's then they might look closer.

Exactly!

Take a large PV/wind system(s) generating, say 10,000kWh pa.

An all electric house could use 20,000kWh pa and thus be 'safe'.

A house with gas CH could use 3,000kWh electricity and, say 7,000kWh gas and fall foul of that regulation.

Indeed few owners with PV know how much electricity their house consumes, so how would HMRC determine a figure?

e.g. You generate 4,000kWh. You pay electricity company for 2,000kWh. You have used somewhere between 2,000kWh and 6,000kWh

Martyn1981

WestonDave wrote: »

I wonder if this is simply a case of something which hasn't been updated recently. If it was provided before the advent of FIT's and more importantly before the grade D EPC requirement it could act as a disincentive to efficiency savings.

Excellent point. If we all sat in the dark with the telly off reading books (tricky in the dark!), with every efficiency / economy device and idea running, then we'd all pretty quickly bump up against the 120%.

Maybe my attitude last year was a little ignorant, but I filed this issue under 'worth knowing, but ignorable', certainly as far as any normal 4kWp system was concerned.

Mart.