Access the government’s new Super-Deduction tax break for commercial solar PV and energy storage
Thanks to the new super-deduction tax break, announced as part of Rishi Sunak’s Budget 2021, UK businesses can now hit their Net Zero and decarbonisation targets faster and more economically by upgrading their clean energy infrastructure with solar PV and energy storage. Act now to take advantage of the UK Government’s 130% tax-break on new plant and machinery to reduce the up-front cost of investing in your own dispatchable, low carbon energy infrastructure to lock in long term energy cost savings and reduce your businesses carbon footprint significantly.
What is the Super Deduction?
Chancellor Rishi Sunak announced the brand-new super-deduction capital expenditure relief in March this year. It enables companies paying Corporation Tax to claim 130% capital allowances on qualifying plant and machinery investments that would ordinarily qualify for 18% main rate writing down allowances.
For further guidance on which assets qualify for the Super-Deduction, HM Treasury have published a Super Deduction Factsheet containing further information.
The super-deduction and FYA capital reliefs are available for expenditure incurred over the next 2 years – from 1 April 2021 until the end of March 2023. Note, these reliefs only apply for new, unused plant and machinery and not second-hand or leased assets.
Which energy equipment qualifies for the new tax reliefs?
Most types of energy equipment should qualify for either the super-deduction or 50% FYA, including, but not limited to, the following:
- Solar Panels
- Energy Storage Equipment (including Vanadium Flow Batteries)
- Electric Vehicle (EV) Charge Points
- Combined Heat and Power (CHP)
- Heat Pumps
You can find our more about our range of energy storage products, specifically designed for UK businesses here. Alternatively, read more about how we are working with Scottish Water to reduce their site energy bills whilst accelerating their progress to Net Zero.
What types of energy projects are particularly suitable for the Super Deduction?
The Office for Budget Responsibility estimates that at its peak, the super-deduction will raise the level of business investment by 10%, or roughly £20bn a year. The super-deduction is most beneficial for projects with higher capex costs and lower operation costs, such as renewable energy infrastructure projects. Installing on-site PV generation, coupled with energy storage (such as Vanadium Flow Batteries) for example, can convert annual energy costs into a super-deductible investment.
Invinity’s Vanadium Flow Batteries have a number of key advantages over conventional lithium-ion batteries.
- Vanadium Flow Batteries do not degrade with use and are capable of longer charge/discharge durations, meaning they are better suited to use alongside solar PV, which required heavy, daily use and charge/discharge durations of 4 hours or more
- Vanadium Flow Batteries are safer than lithium-ion batteries and are inherently non-flammable. This means they are well suited to use in industrial environments and don’t require expensive temperature control, fire suppression and safety monitoring systems-
- Vanadium Flow Batteries have a working life of more than 20 years (approximately the same as that of a solar panel) and are almost 100% recyclable at end-of-life. This means that Vanadium Flow Batteries do not incur significant disposal and recycling costs, reducing investment risk for business owners.
- Vanadium Flow Batteries can perform a wide range of services. This means that they have the flexibility to adapt to changes in the market over their 20 year life. They are also capable of ‘stacking’ multiple services together to increase project returns (i.e. performing solar shifting + frequency response + site backup)
How much Corporation Tax can you save?
By utilising the super-deduction, a UK business could save ~25% of the value of qualifying investments in the form of corporation tax relief. For example, if you spend £2m on qualifying items of equipment, £2.6m can be deducted from your company’s taxable profits – assuming a corporation tax rate of 19%, this results in a saving of £494,000.
Previously, businesses could only claim up to £1m through the temporary boost to the Annual Investment Allowances (AIA) in the first year, saving £190,000 on their tax bill. The AIA limit is expected to revert to £200,000 at the end of 2021, further increasing the benefit for companies that can shift capital-intensive projects into the super-deduction period through additional and early tax benefits.
What support is available from Invinity Energy Systems?
Upgrading your energy infrastructure to benefit from distributed energy technologies such as onsite flow battery storage coupled with solar PV generation can be technically complex. At Invinity, we can help size your storage system and energy generation assets to optimise returns as well as maximise on-site consumption of renewable energy. This is not only a valuable business investment but also a sure way to meet your emission reductions targets and hedge against rising energy prices.
The clock is ticking to access the government’s generous capital tax relief. Reach out to us for help in converting your sustainable energy ambitions into action.
Do you have a project in mind? Contact our team today for an assessment or give us a call on 0204 526 5789
Generally speaking, UK-based sites which meet the following criteria are a good fit for Invinity Vanadium Flow Batteries:
- Minimum average electricity load of 200kW or more
- Adequate space for the installation of roof or ground mounted Solar PV
- Sites / facilities which are self-owned (no landlord)
Our team of experts will ask you for further information about your site in order to accurately model the potential returns and energy flows of a PV + Flow battery project for your site. The information we require includes:
- Half hourly electricity import data
- A copy of a recent bill (or information on the current electricity tariff)
- An indication of how much solar PV you are planning to install
- Indicative £/kWh pricing for your proposed PV installation (we can assist you with this if unknown)
Contact our team today for an assessment or give us a call on 0204 526 5789