Many land owners are considering some type of renewable energy project. In the right circumstances, such projects can provide a substantial new income source and be very attractive but before committing, careful consideration must be given, not just to the commercial viability of the project, but also to the legal structure and subsequent tax implications of the project.
For example, a situation where a landowner simply leases land to another party carries less inherent risk for the landowner in terms of capital investment and income volatility. However, such an arrangement has the potential to jeopardise the availability of Agricultural Property Relief for Inheritance Tax purposes, could impact on VAT input claims, and could affect reliefs for Capital Gains Tax purposes. In addition, landowners should carefully scrutinise contracts with relation to reinstatement of land, payment terms and so on. We can advise on all these matters.
If the aim is to produce energy for use on the farm, with the possibility of selling any excess energy to the national grid, detailed financial projections should be undertaken to establish the likely income stream and payback period. Such projects often require significant capital expenditure and if finance is sought, potential funders will require robust forecasts before considering lending.
In other cases, it may be beneficial for landowners to enter into a joint venture with an energy company, or to receive rent into an entity separate from the farming enterprise.
Each project is unique, as are the circumstances of each landowner, and we therefore look both at the big picture and the detail, before advising on the right way forward for any renewables project.
If you are considering investing in a renewable energy project, or have been approached by a party interested in a site on your land, please get in touch to see how we can be of assistance.
Require more information?
If you would like more information or would like to speak to us direct then call us on 0141 956 4454. Or if you would prefer, ask us a question online.