The new tax year: how your land rent payments are likely to be affected

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The new tax year: how your land rent payments are likely to be affected

6th March 2018 by Accounting for Energy

By Accounting for Energy – (4 min read)

“End of Tax Year” evokes all sorts of emotions in people – for some, the thought of the paperwork and facing their accounts fills them with dread, while for others it’s a motivating factor to finish on a high or start a new cycle with a fresh sheet. This time of year also has an impact on land rent payments, and there are a number of factors to be aware of to ensure you are getting the best negotiation. In this article we outline three situations that could affect your land rent payments in the coming tax year.

Firstly, it’s important to understand that payments are calculated using a minimum rent fee which is a flat rate, then there is the turnover rent, which is based on energy output and activity.

Inflation

It’s expected that inflation will go up at some point in the year which will mean rent payments are likely to be static. The normal expectation is that rent payments go up by about five percent with inflation, but if there is an increase, the most likely scenario is that payments will freeze, and for those who do see an increase, it’ll only be by a percent or two. This is because the minimum rent payment is linked to inflation and increases at a slower rate when interest rates rise, and turnover rent is affected by energy prices which would go down, so the money being made from the energy source would be less.

Brexit

Brexit could actually have a positive effect on both rent payments, especially if we get a hard Brexit. As the value of the pound decreases and the price of imports increase, the cost of electricity will see a hike, as will the cost of living which will in turn affect inflation and minimum rents.

We currently import electricity from the Internal Energy Market and once our relationship with the EU changes, this may need to be renegotiated. We could find ourselves in a position where there is more demand in the UK for wind energy and electricity, which will increase turnover rents

The Budget

Based on the 2017 Autumn Budget announcement farmers will keep more of their money in the new tax year. The Personal Allowance will go up by £350, while the basic rate of income tax goes up by £1,000 to £34,500. In addition, self-employed workers who pay Class Four National Insurance will be able to keep £1,350 more of their money before falling into the higher earnings threshold.

Here’s an example of how the budget might affect farmers:

Scenario One

A farmer whose wind farm produces £11,850* will get an extra £88.20**:

– This year they keep £11,300.06.
– Next year they keep £11,388.26.

Scenario Two

A farmer whose wind farm produces £46,350* will get an extra £263.70**:

– This year they keep £35,619.50.
– Next year they keep £35,883.26.

It’s hard to assess what these factors combined will mean for land owners, but given that rent payments increase annually, landowners will be affected in some way at different times. Ensuring you are receiving accurate returns from your renewables investment can be a challenge as it is – we identify underpayments in 75% of our royal audit reviews – and this coupled with the any of the above factors can add another level of inaccuracy. If your rent payments contracts are due for review soon it's worth considering whether you can renegotiate a better deal.

* Assumes no other income. Applies to those who are self-employed but not in receipt of married or blind persons allowance.
** These figures are estimates, contact AfE to find out how you are affected.

To check whether your land rent payments are accurate, get in touch with our specialists auditors today.

Posted in Finance, Individual landowners, Investment, Wind Energy | Comments Off

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By Accounting for Energy – (9 min read)
Earlier this month, Britain reached a landmark in the transition away from fossil fuel reliance. For the first time since 1882, we passed a whole week without using coal to generate electricity. Aside from the important differences in pollution and carbon emissions, renewable energies differ from fossil fuels in another interesting way. Whereas fossils are widely considered as ‘resources’ in the traditional sense, the resources used to generate renewable energy often inhabit a more grey area.

Testimonials

“We found your report informative and easy to read, it was good to see how the wind farm is performing and we were pleased with the results of the audit”

Mark Charles, Exeter
“Job well done”

Sara James, Durham
“Early non-payment discovered so very happy with outcome”

Martin Roberts, Peterborough
“Excellent service. The review has given me peace of mind”

Tracy Maria, Cumbria
‘We found the report very thorough and really interesting and were pleased that the payments have been corrected and appreciate your help with this very much’

David Terrence, Devon
“In every instance Accounting for Energy have identified and recovered shortfalls in rent for my clients. Not only do the landowners receive back payments but they are also keen to show developers that they are being held to account.”

Chris Thyer MRICS FAAV Land Agent, GSC Grays
“We don’t have comparable leases in renewable energy meaning there are few examples to draw from, so it’s always good to have checks and balances in place. We would recommend Accounting for Energy for their diligence.”

Ali Walker Property Co-ordinator, Bath and Wells Diocese, Church of England
“The information provided by the turbine owner seemed to be comprehensive. The issue comes with knowing if all the data is complete and the audit was able to identify areas that we should have been receiving royalties on.”

Ben Ardern Financial Controller, Dewlay Cheesemakers
“I worked with Travis on a set of arbitral proceedings to recover unpaid royalties on behalf of the landowners of a large renewable energy site. I was very inspired by his passion for his industry and his tireless commitment to getting the best results.”

Sarah Bishop, Commercial Disputes Solicitor
“Travis is the go-to person for renewable energy landowner royalty payments. He gets into the details of a case, and is very tenacious in identifying and recovering any monies owed to landowners.”

Grant Jones, Chartered accountant, solicitor and practicing arbitrator
“I would recommend Accounting for Energy because they are clearly experts in this area, and they were good to work with. It was an easy decision to get them on board because we really didn’t have the expertise or the time to be trawling through the lease and power purchase agreement.”

Nick Kenyon, CEO, Dewlay Cheesemakers

Testimonials

“We found your report informative and easy to read, it was good to see how the wind farm is performing and we were pleased with the results of the audit”

Mark Charles, Exeter
“Job well done”

Sara James, Durham
“Early non-payment discovered so very happy with outcome”

Martin Roberts, Peterborough
“Excellent service. The review has given me peace of mind”

Tracy Maria, Cumbria
“We found the report very thorough and really interesting and were pleased that the payments have been corrected and appreciate your help with this very much”

David Terrence, Devon
“In every instance Accounting for Energy have identified and recovered shortfalls in rent for my clients. Not only do the landowners receive back payments but they are also keen to show developers that they are being held to account.”

Chris Thyer MRICS FAAV Land Agent, GSC Grays
“We don’t have comparable leases in renewable energy meaning there are few examples to draw from, so it’s always good to have checks and balances in place. We would recommend Accounting for Energy for their diligence.”

Ali Walker Property Co-ordinator, Bath and Wells Diocese, Church of England
“The information provided by the turbine owner seemed to be comprehensive. The issue comes with knowing if all the data is complete and the audit was able to identify areas that we should have been receiving royalties on.”

Ben Ardern Financial Controller, Dewlay Cheesemakers
“I worked with Travis on a set of arbitral proceedings to recover unpaid royalties on behalf of the landowners of a large renewable energy site. I was very inspired by his passion for his industry and his tireless commitment to getting the best results.”

Sarah Bishop, Commercial Disputes Solicitor
“Travis is the go-to person for renewable energy landowner royalty payments. He gets into the details of a case, and is very tenacious in identifying and recovering any monies owed to landowners.”

Grant Jones, Chartered accountant, solicitor and practising arbitrator
““I would recommend Accounting for Energy because they are clearly experts in this area, and they were good to work with. It was an easy decision to get them on board because we really didn’t have the expertise or the time to be trawling through the lease and power purchase agreement.”

Nick Kenyon, CEO, Dewlay Cheesemakers

Testimonial with bg

“We found your report informative and easy to read, it was good to see how the wind farm is performing and we were pleased with the results of the audit”

Mark Charles, Exeter
“Job well done”

Sara James, Durham
“Early non-payment discovered so very happy with outcome”

Martin Roberts, Peterborough
“Excellent service. The review has given me peace of mind”

Tracy Maria, Cumbria
‘We found the report very thorough and really interesting and were pleased that the payments have been corrected and appreciate your help with this very much’

David Terrence, Devon
“In every instance Accounting for Energy have identified and recovered shortfalls in rent for my clients. Not only do the landowners receive back payments but they are also keen to show developers that they are being held to account.”

Chris Thyer MRICS FAAV Land Agent, GSC Grays
“We don’t have comparable leases in renewable energy meaning there are few examples to draw from, so it’s always good to have checks and balances in place. We would recommend Accounting for Energy for their diligence.”

Ali Walker Property Co-ordinator, Bath and Wells Diocese, Church of England
“The information provided by the turbine owner seemed to be comprehensive. The issue comes with knowing if all the data is complete and the audit was able to identify areas that we should have been receiving royalties on.”

Ben Ardern Financial Controller, Dewlay Cheesemakers
“I worked with Travis on a set of arbitral proceedings to recover unpaid royalties on behalf of the landowners of a large renewable energy site. I was very inspired by his passion for his industry and his tireless commitment to getting the best results.”

Sarah Bishop, Commercial Disputes Solicitor
“Travis is the go-to person for renewable energy landowner royalty payments. He gets into the details of a case, and is very tenacious in identifying and recovering any monies owed to landowners.”

Grant Jones, Chartered accountant, solicitor and practicing arbitrator
“I would recommend Accounting for Energy because they are clearly experts in this area, and they were good to work with. It was an easy decision to get them on board because we really didn’t have the expertise or the time to be trawling through the lease and power purchase agreement.”

Nick Kenyon, CEO, Dewlay Cheesemakers

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