Wind Turbines and HMRC Inheritance Tax for Farmers

Although Arkle does not advise on tax matters we are aware that the inheritance tax rules surrounding farming are complex, and we do recommend you seek expert advice from qualified tax advisors on this subject.

Farms that are purely in the business of farming enjoy generous dispensations from HMRC ensuring that on the death of a farmer inheritance tax does not impede the transfer of the family farm from one generation to the next.

Many farms have invested in renewables, such as wind turbines, in order to secure a long-term income, so when a farmer dies HMRC looks closely at the farm and its business activities to make sure the business continues to be a farm as defined by HMRC.

We have been told that on the death of a farmer, HMRC regularly raise questions about wind turbines which are owned and located on farmland. Questions such as “is the operation of a wind turbine a farming activity or not?” The implications of HMRC answering “no” to this question are huge and have the potential to result in large, and unexpected, tax bills.

For example: A farmer is a sole trader and dies five years after installing a new 250 Kw wind turbine. HMRC might take the remaining 15 years of ‘Feed In Tariff’ (FiT) payments, apply a Net Present Value calculation and add the sum to the farmer’s estate for inheritance tax purposes. This could be as much as £1m added to the estate for tax purposes.

Some farmers take professional advice and form a new limited company with the specific purpose of leasing land from the farmer on which the turbine will be located. This is known as a Special Purpose Vehicle (SPV). Ideally the lease should be signed before grid connection and planning permission are approved.

Even though the SPV is a “new start company”, which will own and operate the turbine, Arkle understands the reasons behind this corporate structure and supports lending to SPVs.

If you would like help with financing your own wind turbines, please get in touch using the form on the right.

Wind Turbines and HMRC Inheritance Tax for Farmers

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