5 things to consider if your thinking about a solar farm enterprise
The initial flurry of activity on the part of solar power companies acquiring options on suitable lands to lease has finally died down and much of the land adjacent to ESB sub-stations has been mopped up.
However, this 'calm after the storm' period has given landowners more time to ponder the broader tax and succession implications of the deals they have entered into.
Certainly, there was no time for contemplation during that frenetic period last spring when landowners were being bombarded with tempting offers of future land leases that would leave them awash with money for the rest of their days - or so it seemed.
1. Income Tax Position
The tax relief provided by section 664 Taxes Consolidation Act 1997, which exempts income derived from certain leases of farm land, was introduced to encourage more landowners to lease out land on a long-term basis to active farmers, thereby encouraging more productive use of the land.
However, this relief does not apply where farm land is leased out to a solar energy company for the purpose of solar energy development on the land. This is because the lessee is required to use the farm land leased from the lessor on a commercial basis and with a view to the realisation of profits.
Thus, in line with the intention of the legislation to increase the access to land for active farmers who wish to enlarge their farm holdings, relief under section 664 is only intended to apply to lessors who enter into leases of farm land with genuine farmers.
Income received by a lessor from a solar energy company is not income received relating to farm land used for the purpose of a trade of farming, notwithstanding that the solar energy company may agree to occupy some of the land around the solar panels for the purposes of husbandry.