For landowners looking to secure income through renewable energy development, a key decision is whether to go it alone and install and operate the project themselves, or simply to lease the land to a developer. But the two options have very different tax consequences from the perspective of capital taxes. The major concern for most landowners is inheritance tax.
The two main reliefs are agricultural property relief (APR) and business property relief (BPR) and can be either 50% or 100% relief.
APR only gives relief to the agricultural value of the land and so any value accruing due to the renewable energy project will not qualify.
BPR may be available depending on whether the project is considered by HM Revenue and Customs to be an investment as opposed to a trade. Essentially, an in-hand project is likely to be considered a trade and BPR may well be due once the required minimum two year period has been met.
Let land is, however, in most circumstances regarded as an investment and as such would not automatically qualify for BPR.
Clearly, it is important when deciding to secure an income from renewable energy that the correct structure is put in place in order to obtain either full APR or BPR. Professional advice should be sought before entering into any contract. Green & Co would be happy to help in such circumstances. Contact us on 01633 871122.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.