What are the tax implications when buying a turbine and generating some of my own electricity?

There is currently no scheme of tax relief for individuals or domestic users who invest in their own on-site generation. Persons who conduct a trade can claim an annual tax allowance of 12.5% over 8 years on the actual cost of machinery or plant provided for the purposes of that trade. According to the Revenue Commissioners it is possible that on-site generating equipment could qualify as machinery and plant if used for the purpose of a trade i.e. no power is going to the home.

The relevant legislation is Section 284 of the Taxes Consolidation Act 1997.

The entitlement to the allowance is subject to the following conditions:

• At the end of the year of assessment the machinery or plant continues to belong to the person carrying on the trade,
• At the end of the year of assessment the machinery or plant is in use for the purpose of the persons trade,
• The machinery or plant while being used for the purpose of the trade is wholly and exclusively so used.

Payment by electricity suppliers for excess electricity exported to the grid may have tax implications under current legislation. Persons resident in Ireland are liable to income tax on their income from all sources and should include such income in their annual tax return.

It is not possible to set out a generic position here as all the facts of a case need consideration. Depending on whether the generating of electricity is incidental to the main trade or whether it could be considered a separate activity/trade a different treatment applies. A person may be affected by the restrictions contained in section 409D of the Taxes Consolidation Act 1997 which limit the use of capital allowances by passive investors in certain trades, one of which is generation or supply of electricity.

The Revenue Commissioners recommend that any individual or business intending to invest in on-site generation technology seek professional tax guidance. The information provided here gives an indication of the tax implications but each individual or organisation's circumstances may be different.