Michael Healy-Rae
Question:355. Deputy Michael Healy-Rae asked the Minister for Finance if he will address a matter (details supplied); and if he will make a statement on the matter. [27249/23]
View answerTuesday, 13 June 2023
Questions (355)
Written answers
A person engaged in the microgeneration of electricity is taxable each year on their profits/gains from the sale of electricity as calculated under Schedule D Case I or Case IV, as the case may be. Profits arising from the carrying on of a trade are chargeable to tax under Case I whereas profits generated from activities which do not have the characteristics of a trade are chargeable to tax under Case IV.
Revenue have advised me that, generally, profits earned from the micro-generation of electricity by private individuals in a domestic setting are liable to tax under Case IV on the basis that the individual is not trading or in the business of generating electricity for sale or supply. In assessing income under Case IV there is no specific provision in the tax code setting out allowable or dis-allowable costs. However, it is Revenue practice to allow a deduction for incidental costs directly associated with the generation of Case IV profits. In calculating such profits, a deduction is allowed for any expenses of a revenue nature (for example, costs of repair and maintenance of equipment) incurred wholly and exclusively in generating the profits. As there will be a personal element to any expenditure incurred, a just and reasonable apportionment of the expenses will be necessary. No deduction is allowed for any capital expenditure incurred (for example, the cost of purchasing and installing the solar panels). Additionally, no capital allowances are available in relation to such expenditure as the profits do not arise from the carrying on of a trade.
I would note, however, that section 216D of the Taxes Consolidation Act 1997 provides that up to €200 per year of profits arising to an individual from the generation of electricity from renewable, sustainable or alternative sources of energy at the individual’s sole or main residence (referred to as the micro-generation of electricity) is exempt from Income Tax, USC and PRSI. There is no requirement to include the exempt profits in an income tax return. However, should the individual have profits exceeding €200 from the micro-generation of electricity in a year of assessment, the excess is taxable as outlined above and should be included in a return of income.