RENEWABLE ENERGY SCHEMES

Forward-looking farmers and landowners are increasingly integrating energy production into their existing agricultural operations to build businesses that are both environmentally sustainable and economically viable. Landowners considering renewable energy schemes would be well advised to ensure inheritance tax implications are considered from the outset.

Growing Trend With Landowners

Renewable energy schemes already account for over a quarter of UK electricity production and it is estimated that farmers own or host over half of the UK’s solar power and anaerobic digestion capacity, as well as most of the wind power.

Although national government policy has recently been cutting incentives for low-carbon energy, further growth in agricultural renewables will likely be driven by reducing costs of some renewable technologies (especially solar PV), and the emergence of new complementary technologies. Renewable energy production has indeed become part of the agricultural growth agenda.

SHORT TERM INCOME VERSUS LONGER-TERM CONSIDERATIONS

With three-quarters of the British land area used in the agricultural sector, farm businesses can choose to become energy producers in their own right or use their existing land / building assets for use as an energy plant developed by others. There is often a tendency for landowners to concentrate on the potential income benefits in the shorter term and reducing the tax on the profits from the energy generation or lease income.

However, it is also vitally important to consider how any changes made now might impact succession proposals for the business, and how the renewable energy business activity will affect the longer-term tax planning position of your land and the various tax reliefs that are linked to it. With many leases extending up to 30 years, the potential changes in fiscal position of the asset for that period, or the driver to allow for an income stream for the younger generations of the family, need to be thought through as early as possible.