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Renewable Heat Incentive (RHI) schemes were run by the聽UK聽government to provide financial incentives to increase the uptake of renewable heat energy. The schemes are still ongoing but new applications are not allowed.

There were 2 available schemes:

• domestic聽Renewable Heat Incentives
• non-domestic聽Renewable Heat Incentives

The schemes had separate tariffs (or payments), conditions and processes. However, both schemes provided subsidies in the form of payments to eligible renewable heat generators.

The tax you pay is not affected by the type of聽Renewable Heat Incentives聽scheme making the payment but on how the heat is used.

The payments you receive are treated for tax purposes as a reduction in the cost of energy you buy. If the amount you receive exceeds your costs then the profit may be subject to tax.

Individual use

If you鈥檙e using heat solely for personal domestic use, the payments you receive are not chargeable to Income Tax.

If payments are received for both personal domestic use and another purpose (such as the provision of heat to a neighbour for a fee) any profit relating to the non-personal element is chargeable to Income Tax as miscellaneous income. This is because you鈥檙e providing a service in connection with the heat generated.

Where the profit is chargeable to Income Tax, only the operating costs of the heating system attributable to the heat provided for non-personal domestic use are deductible in working out the miscellaneous income.

If you occupy premises that has both private and business uses (such as having an office in your home) the payments should be deducted from the cost of heating before apportioning any of the cost to business use.

Business use

If you鈥檙e a business or a trader any聽Renewable Heat Incentives聽payments you receive should be deducted from the cost of energy you buy. If you make a profit this is a business receipt and the normal Income Tax and Corporation Tax rules for receipts and deductions apply.

If you鈥檙e a landlord the tax treatment on payments received for heat generated for the use of a tenant should be deducted from the cost of providing heat in calculating the allowable heating costs of the property business. Any excess of payments over heating costs is taxable as property income.

If payments are received for heat generated for use other than by the tenant then the profit will be taxable as either trading or miscellaneous income.聽 The heating costs attributable to the generation of heat provided other than for the tenant would be deducted in working out the trading or miscellaneous income.

When businesses can claim capital allowances

If you are a business, you can聽claim capital allowances聽on plant or machinery. This is because you were not able to claim the 100% first year allowances on energy-saving plant or machinery where聽Renewable Heat Incentive聽payments were paid for a heating system.