By Robert Black, Rural and Landed Estates Specialist.
With the ever-increasing push for green credentials, the UK renewable energy market is expanding, and many farmers are now facing the opportunity of diversifying or letting land for solar or battery storage.
The government’s Net Zero plan requires 70GW of Solar generation by 2035: currently this stands at 13.4GW. To achieve this goal, an additional 198,000 acres will be required for solar generation.
With a return of around a £1,000 an acre for solar and £2,000/MW for battery storage, it could be an interesting proposition to take land out of production and enter a 25-year agreement with an energy company.
For many, this opportunity is a once in a lifetime event to create significant cashflow for their business and family.
As always with these projects it always sensible to seek expert advice early in the negotiations.
It is important to note, with all these types of opportunities, that a business structure which works for your neighbour may not necessarily appropriate for your circumstances. Inappropriate structures could prove costly and potentially be irreversible.
Landowners should also consider the potential tax pitfalls which can be generated from these types of agreements. This is where seeking advice from an accountant with specialised tax knowledge can be helpful, as creating a tax efficient structure could benefit both the current and future generations.
Such enterprises can change the nature of the land for tax purposes and therefore vital tax reliefs can be lost. Planning ahead at the initial stages and involving professionals early on can save significant capital gains tax, income tax and inheritance tax, so it is worth being ‘ahead of the game’ to fully maximise the opportunity.
If you are considering solar or battery as an area to diversify into, please get in touch.