The Answers that Farmers Want!

21st April 2011

Across two weeks in April, almost three hundred people from The Scottish Borders in the North to Yorkshire in the South have attended a series of seminars hosted by gfw-Renewables. The audience included farmers, landowners, accountants, solicitors and bank managers – all with the common aim of finding out more about the opportunities and the pitfalls of renewable energy projects.

Commenting afterwards Director of gfw-Renewables, Ben Collard said: “We were delighted to see so many people interested in finding out more about the opportunities associated with renewable energy. The key message that we wanted to present is that there is a fine line between success and failure and that knowledge and planning are vital. Feedback after the events revealed that there is a lot of conflicting if not misleading information around and people were unsure of the direction and technology to pursue. At all of the events the key aim was to provide attendees with up to date information and clarity on some of their concerns.”

The key questions which were repeated and reflected across all events are highlighted below with the feedback given by Ben Collard:-

1. What is the significance of March 2013 for the current feed in tariffs?

“The FiTs are now under review with a firm announcement expected at the end of this year. There may be indicative new figures announced by DECC prior to the summer recess in advance of a further consultation period. It is anticipated that if new tariffs are announced they may take effect from 1 April 2012. At the current time the figures we have up to March 31st 2013 are subject to this review.”

2. How important is wind speed monitoring for banks and turbine manufacturers?

“Wind Speed Monitoring is important and this very much depends on the size of the turbines, the lending institution and the manufacturer. Wind speeds of less than five meters per second will result in very long pay back periods for projects. Therefore our advice to farmers is to consider erecting an anemometer for the required period of between nine to twelve months. This will provide actual data rather projects on indicative web based predicted wind speeds.”

3. When will the Renewable Heat Incentive start for domestic renewable heat users?

“The RHI is likely to commence for domestic customers from July /August 2012. To help with the capital cost of domestic installations there is a proposed ‘premium payment’ scheme made between 2011 and July August 2012. The proposed figures range from £300 – £1,250 depending on the technology.”

4. Can renewable heat systems be applied on a centralised basis to holiday lets?

“As everyone knows holiday lets are a very important revenue stream for many farmers and the RHI offers the potential to drastically reduce fuel and heating bills and provide an additional revenue stream. If you are off the mains gas grid and use oil/kerosene or LPG then significant year on year savings can be made.”

5. Is there a scale of turbine you can guarantee to get through planning?

“No. Planning constraints will depend upon the area in which you live, as different local authorities look upon applications very differently. As a rule of thumb smaller turbines with less visual impact are usually viewed more favourably. Undertaking detailed pre-application consultations with planners can save significant time and cost in the long run.”

6. What is the renewable development potential on tenanted land?

“We had many tenant farmers attending these events concerned that an additional revenue stream will have an impact at their rent review. We have recently submitted two wind turbine applications for tenanted farms and our advice is that it is crucial that the tenant speaks to and negotiates with the landlord at the earliest opportunity.”

“A recent case involved the surrender of a small parcel of land the turbine was to occupy and then the negotiation of a separate 54 Act Lease.”

7. What are the tax advantages of investing in wind energy?

“Farmers can utilise their capital allowances of up to £100,000 up until the end of this financial year. Self Invested pension schemes also offer exciting opportunities for the revenue from wind energy.”

The current guidance provided by HMRC indicates the following:

  • Assuming that the turbine is operated within a business (be it exported or consumed within the business), the income will be taxed as trading income. However, should the electricity be consumed for private use (i.e. within a farmhouse) this element would not qualify as trading income.
  • If purchased and operated by the business, the turbine and the capital costs associated with construction would qualify as plant and machinery for capital allowances. Therefore on the assumption that no other capital expenditure is made during the financial year of the turbine procurement, the first £100,000 would qualify for 100% tax relief and the balance at 20% per tax year. If there is a private element, again this would reduce the capital allowance available. Since the emergency budget following the election, this amount of relief is only available until March 2012, thereafter dropping to £25,000. If there is a private element, again this would reduce the capital allowance available.
  • There is discussion regarding the FIT being tax free for income tax purposes. Current advice is that this is unlikely to occur should capital allowances be available.
  • In regard to Inheritance Tax, as long as the income and ownership is within a trading business, the turbine should qualify for Business Property Relief.

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