Solar energy is one of a number of technologies that will help Ireland meet its 2020 target of acquiring 40 percent of electricity from renewable sources. It is estimated that an established solar sector could generate up to 20 percent of Ireland’s overall renewable electricity demand.
Unlike the UK, Ireland has virtually no solar industry. Installing solar panels on your land can diversify income and make your farm more viable, however, as with all renewable projects, planning permission and rights of residents have to be considered in a proper manner.
Most installations involve a lease arrangement between a landowner and a solar farm operator. Until recently, however, these arrangements could adversely impact the land owner’s ability to claim retirement relief when selling or transferring land. There was also doubt about whether gifts or inheritance of land under solar panels could qualify for agricultural relief. Now, measures included in Finance Act 2017 largely address these concerns by extending the definition of assets that can benefit from CGT retirement relief and CAT agricultural relief to include leased land where solar panels have been installed.
These changes represent a significant improvement.
Frequently, farmers consider solar for the first time when they receive an approach from another farmer or third-party seeking to access their lands.
Typically, when a renewable energy developer approaches you, they will seek an option agreement. This gives them an ‘option’ to acquire access to your lands and allows them to insist that you execute a lease in the event that they wish to develop on your farm at some time in the future. Depending on the terms, this could tie up your land for up to 35 years so it is essential to take legal and tax advice before agreeing on these complex transactions.
In exchange for entering into the option agreement, you receive payment. How this payment is structured will depend on the terms and duration of the agreement.
While the prospect of allowing someone else to project manage and finance a solar farm development on your land can be tempting, you may achieve better rewards if you run the project yourself. Consequently, if you receive an approach, it is essential to take professional advice before entering into an agreement which could have long-term consequences for your business. Ifac has considerable experience in the renewable energy sector. If you are considering investing in solar energy, now is the time to talk to a member of our team.