A taxpayer installed solar panels and a full electricity generating unit (solar) at his business premises. The business now generates its own power, and his trade operations/income are derived from this premises. Can he claim a S12L deduction if all the p
Author: Peter Surtees
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
Your client would qualify for the deduction provided for in section 12L of the Income Tax Act, based on the calculations in section 12L(2) or (3), depending on the capacity of the installation and whether it continued to be used in the client’s trade. The annual deduction would currently apply until the end of 2022, but it is likely to be extended beyond that date. As for depreciation or wear and tear, see section 12B, which permits the cost of the installation to be written off: (aa) where the photovoltaic solar energy generated exceeds 1 megawatt, in three annual instalments of 50%, 30% and 20% respectively of the cost, commencing in the year of assessment in which the installation is first brought into use for the purposes of the client’s trade; or (bb) where the photovoltaic solar energy generated does not exceed 1 megawatt, 100% in the year of assessment in which the installation is first brought into use for the purposes of the client’s trade. Like section 12C, the allowance under section 12B is deductible in full in the year in which the asset is brought into use for purposes of trade for the first time. You don’t pro rate it as you do with the wear and tear allowance under section 11(e).