3 Ways to Lower Costs of Switching to Commercial Solar
By 2030, businesses owning or renting commercial properties will face a significant shift in energy standards. The government, eyeing a net-zero carbon footprint by 2050, has mandated that all such properties must have an Energy Performance Certificate (EPC) rating of at least level C by 2027 and level B by 2030. Solar presents one of the easiest ways to achieve instant impact. However, if the cost of switching is something that concerns you, there are multiple schemes available that can ease the financial impact of a switch. Here we look at three examples - to find out what may be available in your area, contact us for the latest information.
1) Tax Relief on Solar Panel Installation
Investing in solar panels is not just a great step towards sustainability but also comes with significant tax advantages. Here's a breakdown of what businesses can benefit from:
Solar panel installations qualify as part of the £1m Annual Investment Allowance (AIA), which ensures 100% tax relief on qualifying assets like plant machinery and integral features, including solar panels.
Starting from April 1, 2023, and continuing till March 31, 2026, businesses can alternatively capitalize on a 50% first-year allowance for integral features like solar panels under the 'full expensing' regime. This is especially beneficial if a company has exhausted its AIA.
A Quick Illustration:
Let's say the solar panels cost a business £100,000. Using the 50% first-year allowance, £50,000 can be deducted right away from taxable profits (an equivalent saving of £12,500 in income tax). From the remaining amount, businesses can annually claim 6% until the asset’s value becomes zero.
Timing of expenses is crucial for businesses. For example strategically using the AIA for special rate pool items first can maximize tax efficiency. Also, if there’s a gap of 4 months or more between the date of the invoice (or delivery) and the payment date, the expenditure date becomes the payment date, potentially moving the tax relief to the next accounting period.
2) Grants for Sustainable Upgrades
Multiple grants are up for grabs for businesses investing in energy-efficient equipment. An recent example scheme was The Locase program (Locase), which ceased in June 2023 and offered up to £10,000 for qualified energy-efficient equipment purchases. Grants change frequently and are entirely dependent on local government and other parties so you will need to do some homework to see what is available! We recommend visiting Grant Finder or we can help identify options for you.
Remember, if you're utilizing a grant, it will reduce the capital allowances value by the grant amount.
3) Exemptions
Many businesses might be unaware of schemes such as the EII Exemption Scheme, which allows select Energy Intensive Industries to gain an exemption from indirect electricity network costs, thus helping them manage their Renewables Obligation (RO) costs better. As businesses transition to renewable energy sources, such exemptions can significantly reduce operational costs and pave the way for sustainable operations. But be warned - they are very difficult to get accepted onto and come with a lot of regimented assessment and continual montioring to retain. For a deeper understanding, please read the Government's guidelines on EIIS schemes.
To summarise, all these initiatives and incentives can aid businesses in carving a path to a more sustainable future. While challenges lie ahead, the benefits of transitioning to renewable energy sources, especially solar power, far outweigh the initial investment. If you're keen on learning more and exploring how solar can be integrated into your business strategy, reach out to Solar4. We'll help illuminate your path to a brighter future.