Hi I have a farming client potentially looking to purchase a wind turbine. Ignoring all the other issues for the moment (and I know there are many) I was just wanting to clarify whether the income should be taxed as trade income (possibility of loss offset against clients other income re AIA on capital cost) or income from property - I have read different views hence the question. The intention would be to include the income / expenses in the farm accounts, although I don't believe that shhould make any difference. Many thanks for any thoughts.
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This is off the top of my head and neither researched nor based on experience of owning a wind turbine. Nor do I know anyone who does. So treat with due caution.
Duly caveated, it seems to me that what is being sold is something that is produced on the property. It's akin to the wheat/milk/pork whatever that is produced on the farm.
Whilst it's not part of the agricultural trade, it has the feel of a (different) trade. To me.
I would have thought that the feed-in tariffs (I assume that is the form that the income will take) should be treated as income from a separate trade activity.
Hi Ruddles
My thoughts are the same and we treat the income as trade income (albeit separate to the farm) but in the initial year we will have a large capital allowances claim which will create a loss for offset against clients other income. That would make sense to me, its just that if it was treated as income from property, which I'm sure it can't be, the losses could not be offset.
its just that if it was treated as income from property, which I'm sure it can't be, the losses could not be offset.
Why not?
Portia, sorry are you saying that the income should be treated as income from property ?
Also I am referring to income tax, not corporation tax.
No, I'm saying that for income tax purposes it is possible to set a loss against other income, to the extent that it arises from capital allowances (albeit now subject to the £50K cap).
Portia, sorry are you saying that the income should be treated as income from property ?
You read too much into what is said on aweb but perhaps not deeply enough on what you have seen elsewhere. I wouldn't mind betting with you that the views you referred to (some say trade, some say property income) vary depending on who owns the turbine in the situation under discussion. If someone pays me to have their turbine on my land, that's rents. If I own the turbine, it's a trade.
I cannot see any mention of VAT in the otherwise comprehensive Taxation article link. Note that the Feed in Tariff is exempt VAT but the Export Tariff is reduced rated VAT. So you can claim input VAT if the farmer owns the turbines. IIRC you have to use the self billing regime for export tariff VAT.
I cannot see any mention of VAT in the otherwise comprehensive question (which specifically states that other issues are to be ignored for the time being).