Tax on Microgeneration Income

anselld

Hi,

Can anyone advise how to split income from microgeneration on an jointly-owned investment property?

Is it ....

(a) treated as property income and split in the same proportions as rental income for that property, or

(b) treated as individual income of the person named on the FIT contract?

Nicola_Ed

anselld wrote: »

Hi,

Can anyone advise how to split income from microgeneration on an jointly-owned investment property?

Is it ....

(a) treated as property income and split in the same proportions as rental income for that property, or

(b) treated as individual income of the person named on the FIT contract?

Does the help?

http://www.hmrc.gov.uk/manuals/bimmanual/BIM40510.htm

anselld

Nicola_Ed wrote: »

Does the help?

http://www.hmrc.gov.uk/manuals/bimmanual/BIM40510.htm

This is the bit I don't understand in that "The tax treatment of the tariff for income tax and corporation tax purposes will depend on the nature of the receipt in the hands of the recipient. In general where the receipt is received in a business capacity it will be a business receipt on normal principles."

I think it means if I receive the income in a business capacity it is treated as property income ( and split accordingly with the joint owner) or if I receive it in a personal capacity it is taxed as an individual ( not tax free because I don't occupy the property).

But it does not say how to determine in what capacity the income is received. Can I decide? Seems to me it would be the same as rent etc, doesn't matter who the tenant pays it is an income to the rental business. On the other hand, the FIT contract is in my name only, so I don't know!

It doesn't matter much financially, but I dont want to mess up two tax returns by getting it incorrect.

Nicola_Ed

anselld wrote: »

This is the bit I don't understand in that "The tax treatment of the tariff for income tax and corporation tax purposes will depend on the nature of the receipt in the hands of the recipient. In general where the receipt is received in a business capacity it will be a business receipt on normal principles."

I think it means if I receive the income in a business capacity it is treated as property income ( and split accordingly with the joint owner) or if I receive it in a personal capacity it is taxed as an individual ( not tax free because I don't occupy the property).

But it does not say how to determine in what capacity the income is received. Can I decide? Seems to me it would be the same as rent etc, doesn't matter who the tenant pays it is an income to the rental business. On the other hand, the FIT contract is in my name only, so I don't know!

It doesn't matter much financially, but I dont want to mess up two tax returns by getting it incorrect.

Hi - I do not think this is rental income. It is income from the sale of electricity not for the rental of the solar panels. It is a trade and will be taxed a such. Are you thinking that a partnership would be more beneficial than a sole trader?

anselld

Nicola_Ed wrote: »

Hi - I do not think this is rental income. It is income from the sale of electricity not for the rental of the solar panels. It is a trade and will be taxed a such. Are you thinking that a partnership would be more beneficial than a sole trader?

I don't think it is a trade. I think it it is treated as "other income" on the property pages of the tax return. It is simply a question of how to split it between myself and my wife.

Nicola_Ed

anselld wrote: »

I don't think it is a trade. I think it it is treated as "other income" on the property pages of the tax return. It is simply a question of how to split it between myself and my wife.

Following your logic the income would need to be split in the same proportion as the rent.

anselld

Nicola_Ed wrote: »

Following your logic the income would need to be split in the same proportion as the rent.

That is what I think, yes. I would just like a definitive answer which would stand up to HMRC challenge if necessary.

chrismac1

In principle I don't see any difference between this and charging extra rent. Suppose the tenant is picking up the bills which are £1,200 per year - I am going by my own house here which got solar panels fitted in May 2011.

The panels are bringing in £1,400 per year, so my electricity now costs me minus £200. If I was renting my house I would still be passing the "bill" part of the deal to the tenant who does not get to see the £1,400.

Make sure you keep the invoice for the cost of the panels, as this can be claimed against Capital Gains Tax when you come to sell the property. It is an improvement, just like an extension to the house.

anselld

chrismac1 wrote: »

In principle I don't see any difference between this and charging extra rent. Suppose the tenant is picking up the bills which are £1,200 per year - I am going by my own house here which got solar panels fitted in May 2011.

The panels are bringing in £1,400 per year, so my electricity now costs me minus £200. If I was renting my house I would still be passing the "bill" part of the deal to the tenant who does not get to see the £1,400.

Make sure you keep the invoice for the cost of the panels, as this can be claimed against Capital Gains Tax when you come to sell the property. It is an improvement, just like an extension to the house.

thanks chrismac, and yes I have kept all invoices