Tax Implications on signing aSolar Contract

IFACAccountants

“We take the headache, stress and hassle out of accounts, finance and tax planning”

By Declan McEvoy Head of Tax

A.I.T.I.-Chartered Tax AdvisorT.E.P.-Trust and Estate Practitioner

IFAC AccountantsIrish Farm Centre

Email: declanmcevoy@ifac.ieTel: 01 4551036

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Areas to Consider

• Income Tax

• Capital Gains Tax

• Capital Acquisition Tax

• VAT

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Process

Immediate

– Income Tax

– CGT

Longer Term

– Capital Acquisitions Tax

– VAT

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Option to Lease● Separate asset

● Tax Effect is 33% CGT

BUT

If Exercised:

● Treated as a premium

● Part liable to Income tax/part CGT

Not exercised

● CGT – Back to date entered into

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Upfront Payment

● Normally until planning

● Premium at planning

● Merge with each other

● Tax treatments depends on length of lease

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Case Study

Eg. 25 year lease

● 5 K per annum – say for 4 years

● 50k on Grant of planning

CGT - 48% (€33,600)

I.T. - 52% (€36,400)

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Solar – Farm Operating

● Annual lease

● Liable to income tax

● Unless Solar Company farming

● No lease exemption

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Future Issues

● Capital Acquisition Tax

● Business relief – out as land leased

● Agricultural Relief:

● Definition

● Revenue guidance

Tax Health Warning

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Future Issues

● Capital Gains Tax

● 25 year rule

● Owned and farmed for 10 years prior to 1st

● Let out

● Only on lifetime transfer

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VAT

● Developed by tenant

● Tenants responsibility

● Option to tax

● Options – VAT /no VAT on lease

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Summary

● Prior to signing

● On signing

● Revenue Guidance needed

Stability & Experience are the hallmarks of the IFAC Service