How does Annual Investment Allowance work?
The UK government has been wanting to encourage commercial
enterprises to invest in renewable energy. This has been done
through tax incentives and capital allowances.
Not only do these government incentives mean a significant
reduction in electricity spend, but also businesses pay reduced
taxes by claiming back the cost of installing solar panels.
Annual Investment allowance
Solar panels are classed as “Special Rate Assets”, making them
eligible for the governments Annual Investment allowance. Under
this scheme companies can deduct the entire cost of the installation
from their profits, resulting in reducing the corporation tax bill.
The scheme is now expected to last indefinitely from 1st April 2023!
Here’s an example of how it works!
- Your solar PV investment is £99,626.65.
- You get 100% capital allowance on this = £99,626.65
- Apply the corporate tax rate (25%) to the capital allowance = £24,906.66
- Your tax saving by investing in solar is £24,906.66
How do I claim my Tax relief for solar?
All UK businesses that pay corporation tax can benefit from this, as
long as they are legally entitled to install solar equipment and are
used to generate power for your business.
The tax relief is then claimed via your annual Company Tax Return.
Just make sure the claim is submitted for the accounting period in
which you bought the equipment.
This date will be either:
- The date you signed the contract where payment is due within
4 months. - The date the payment is due if it is more than 4 months after
you sign the contract.
