Energy storage is an essential component of transitioning our power networks from fossil fuels to renewable sources.
Until now, however, storing electricity generated from green systems has been a major issue. But with the advancement of battery technology, the problem has largely been dealt with.
What it does require, however, is land and unsurprisingly farmers are being targeted to adopt energy storage as the latest diversification opportunity. The battery units connect with the technology used to generate the power – wind or solar – and therefore need to be in close proximity to them.
So, is this form of diversification good for farmers or just the energy companies wanting to install them? We take a look.
Pros and cons
You probably won’t be surprised to hear that there are pros and cons to getting involved with one of these schemes.
First of all, a major propro, and the most obvious reason to get involved is they can be lucrative for the farmer who is paid a rental sum per acre for the land used to site the renewable energy project and the battery scheme.
Not only this, but the income is guaranteed for a long period of time, with the life-expectancy of a solar farm around 35 – 40 years.
The land can still be used for certain agricultural processes such as the grazing of livestock, which manage the grass around solar panels.
Comprising tax relief
However, there are some major issues connected to this form of diversification as well, meaning that even with the promise of a long-term source of income, the picture isn’t entirely clear cut.
Agricultural Property Relief (APR) and Business Property Relief (BPR) are two forms of Inheritance Tax Relief (IHT) that apply to farm businesses and enable the farm to be passed down the generations without incurring huge inheritance tax burdens.
However, diversification and taking farmland out of food production for other business uses will generally see a reduction of the rate of BPR and APR farm businesses can claim. In a situation where a field or fields are taken out of food production due to solar panels, it is likely that land will lose APR and BPR altogether, even if it continues to be used to graze livestock.
Seek advice
Ian Parker, tax expert and director of Whitely Stimpson, said farmers must take advice on the tax implications of diversification before embarking on a project.
He said:
“Energy generation and storage is the latest diversification trend and it can be extremely beneficial for farmers looking to establish new, long-term revenue streams. But the tax implications of this form of diversification can be far reaching and have a negative impact on the future of the farm business. It is essential anyone considering such a step seeks expert advice before making any decisions.”
Contact us
To discuss diversifying into energy production or any other new business sector, contact Ian on (01295) 270200 or email ianp@whitleystimpson.co.uk.
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