Ripple Energy wind farm?

paul991

i haven't paid any

Exiled_Tyke

barker77 said:

Has there been any further update on how this is counted by HMRC yet? Thinking of investing but would like to understand what tax I would have to pay. 

It's all covered in the prospectus.  For Kirk Hill payments are comprised of return of capital and an excess payment.  The return of capital is not taxable.  The excess whilst described as a dividend has in fact been structured as interest and so would be treated like other savings interest.  Basic rate tax payers are allowed £1000 of savings interest free of tax. So if this hasn't been used it it likely that all the returns are tax free. 

Reed_Richards

On the other hand, you are allowed £2000 in dividends free of tax, irrespective of whether or not you are a basic rate tax payer.

Exiled_Tyke

Reed_Richards said:

On the other hand, you are allowed £2000 in dividends free of tax, irrespective of whether or not you are a basic rate tax payer.

Indeed, yes. But that's not the way they structured it. I have no idea why this is. 

Ugi

I'm totally new to this idea so forgive me if this is obvious but I gather:

All savings on cost of power are taxable as interest (beyond 5% of your investment annually as return of capital).
Any excess capacity is credited & taxable in the same way.

In that case, can the "profit" be divided between everyone in the household (even kids?) since they all use power, or is it taxable only to the holder of the wind-farm? Also, can only one member of a household hold shares in the farm or can you double-up?

Obviously since each person has a separate personal allowance for interest, that might make a big difference.

Thanks

Ugi

paul991

you can only get 120% of your usage off so only the account holder can get the discount.as said before unless you are very rich  any returns are covered by your tax allowances

Ugi

We have an EV and use over 5000 kWH annually.
At the current capped rate of 34p /kWH, that's a saving of around £1500, of which only £150 would be return on investment (5% of £3000).  That leaves me paying tax on £350 - not a fortune I grant you but if my wife & I both buy 2500 kWH per year then we each get to use our allowances.

Exiled_Tyke

Ugi said:

I'm totally new to this idea so forgive me if this is obvious but I gather:

All savings on cost of power are taxable as interest (beyond 5% of your investment annually as return of capital).
Any excess capacity is credited & taxable in the same way.

In that case, can the "profit" be divided between everyone in the household (even kids?) since they all use power, or is it taxable only to the holder of the wind-farm? Also, can only one member of a household hold shares in the farm or can you double-up?

Obviously since each person has a separate personal allowance for interest, that might make a big difference.

Thanks

Ugi

Paul991 has explained most of this. So yes after the 5% the rest is taxable as interest. However basic rate tax payers  will have a £1000 allowance for interest. Higher rate tax payers will have a £500 of tax free interest. 

Your calculations beyond this confuse me.  

Your savings are at the wholesale price of electricity less operating costs. For Kirk Hill this is currently estimated to be 6.4 p per unit for the first year and 4.3p thereafter.    

If you use 5000kWh you would be allowed to buy 6000kWh of Ripple investment.  So 6000 less the 5% capital return at 6.4p would be (6000*.95* 0.064) =£365.   For an investor who isn't using their interest allowance that would be tax free.  

Ugi

As I say, I'm very new to this but the 6.4p is based on 2020 electricity prices, as far as I can see.  Their blog from a while ago suggests much more difference:

Wind farm ownership can protect you from rising prices - Blog | Ripple Energy

And even that was based on an 18p price cap.  It appears to suggest about 4p / kWH in cost and transmission so I assumed 30p saving - could be all wrong.  That's why I came here!

Thanks

QrizB

Ugi said:

As I say, I'm very new to this but the 6.4p is based on 2020 electricity prices, as far as I can see.  Their blog from a while ago suggests much more difference:

6.4p/kWh is what they're paying currently. 4.3p/kWh was the baseline value used when pricing their proposal.

And even that was based on an 18p price cap.  It appears to suggest about 4p / kWH in cost and transmission so I assumed 30p saving - could be all wrong.  That's why I came here!

Ther average wholesale electricity price for the past 12 months has been around 21p/kWh. The current Ofgem cap of 50p/kWh (before the EPG) was based on a wholesale electricity price of about 28p/kWh (so 22p/kWh of non-wholesale costs).

Ripple's contract is up for renegotiation / rebidding in the spring, I think. It will be interesting to see what price they can strike but I wouldn't go counting your chickens yet.