At the moment the UK like other countries is in the depth of an energy crisis, mainly caused by the price of gas and lack of gas supplies.
Energy prices are higher than they have ever been, even with potential government intervention the costs will still be high. On top of that we have climate change, if we are to avoid climate disasters, we need to use renewable energy, such as Solar.
There has never been a better time to make your home more energy efficient.
Solar Panels and Batteries could mean you could become close to self-sufficient for energy, harnessing sunlight in the daytime, storing it in batteries and using it at night.
What if your company purchased a solar system for your home as benefit in kind, what would the tax be?
VAT
From 1 April 2022 until 31 March 2027 a zero rate applies to the installation of certain specified energy-saving materials in, or in the curtilage, of residential accommodation in Great BritainÂ
Energy-saving materials and heating equipment (VAT Notice 708/6) – GOV.UK (www.gov.uk)
It makes no difference whether your company purchases the system or whether an individual purchases it.
Solar panels include all systems that are installed in, or on the site of, a building and that are:
- solar collectors such as evacuated tube or flat plate systems, together with associated pipework and equipment, such as circulation systems, pump, storage cylinder, control panel and heat exchanger
- photovoltaic (PV) panels with cabling, control panel and AC/DC inverter
Capital Allowances
Expenditure on solar panels is special rate expenditure on the basis they are integral features of buildings or structures.
Integral features expenditure can also qualify for AIA, they do not unfortunately qualify for the super deduction (must also be a company to qualify for the super deduction).
https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca22335
To qualify for the allowance the conditions at S33A (1) and (2) etc must be met, please see the link below
EXPENDITURE ON INTEGRAL FEATURES (s. 33A) | Croner-i Tax and Accounting (croneri.co.uk)
Ownership of the property is not a requirement to qualify however the person that incurs the expenditure must own the P&M because of incurring it.
Benefit In Kind
As an employee, with the use of a company assets comes a chargeable BIK. The basic calculation is 20% of market value when first available less any unavailability and any contribution.Â
Example – Solar Panel System Cost = £16,000 x 20% BIK = £3,200 BIK on which the tax is 20% = £640 per year or 40% = £1,280 per year in addition to the tax there is also Class 1A NI at 13.8% (£441.60), but the overall costs is still below the energy cap of £3,500 and even below the Governments suggested cap of £2,500.
In our particular case we have electric cars and work from home and use significantly more than the average levels.
The benefit in kind is reported in section L (assets placed at the disposal of the employee) of the P11D.
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim21873
