BIM40530 - Domestic microgeneration: Renewables obligation certificates for domestic microgeneration
With effect from tax year 2007-08, ITTOIA/S782B provides that no income tax arises in respect of the receipt by an individual of a renewables obligation certificate and section 263AZA Taxation of Capital Gains Act 1992 provides that no gain accrues to an individual on a disposal of a renewables obligation certificate where:
- the individual receives the certificate in connection with the generation of electricity by a microgeneration system
- the system is installed at or near domestic premises occupied by the individual, and
- the individual intends that the amount of electricity generated by the microgeneration system will not significantly exceed the amount of electricity consumed in those premises.
For the purpose of this exemption domestic premises means premises used wholly or mainly as a separate private dwelling.
A microgeneration system is defined in section 4 of the Climate Change and Sustainable Energy Act 2006.
This exemption in aimed at domestic microgeneration which is primarily intended to match the generator’s own home consumption needs. The term significantly exceed is not defined in ITTOIA/S782B and should be considered by reference to the particular circumstances. However, in general, a householder who does not intend to generate an amount of electricity more than 20% in excess of their own domestic needs is unlikely to be regarded as intending to significantly exceed the amount of electricity consumed in their own premises.
No income tax or capital gains tax will therefore arise on renewables obligations certificates received by an individual from domestic microgeneration where the microgeneration system is located at or near their home and the individual intends that the amount of electricity generated will not significantly exceed their own consumption.