Four years ago, we installed a solar PV array on our roof, and now we are in credit with Electric Ireland to the tune of about €2,000.
I understand we are entitled to €400 tax free for the last two years and €200 for the prior year, but cannot see how we can claim this from our supplier unless we close our account and citizens advice says we can only claim if we have a VAT number?
Mr M.O’D.
Well, congratulations on that. Investing in solar energy does require upfront capital even with the grants available from the Sustainable Energy Authority of Ireland (SEAI), so it is nice to see it start to pay its way by sharply reducing your energy bills.
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Certainly if you have built up credits on this scale with Electric Ireland, you are doing better than the average customer who, switcher.ie suggests, can expect to make between €100 and €300 a year.
It is worth noting that there is no obligation for you to be in credit with your electricity provider – only that your bills are paid on time and in full (unless some other arrangement has been negotiated).
On that basis, I see no merit in you leaving €2,000 of your money with Electric Ireland.
I would assume that the electricity provider would automatically use this credit to offset against any ongoing energy bills with it. If not, it is certainly worth contacting Electric Ireland to ask that the available credit on the account is used first before any further cash is deducted from your bank account.
The first thing is always to get to Revenue before they get to you
The same is true if you are a level-pay customer, where your bills are averaged over a year with the same amount taken every month to avoid the highs and lows of seasonal usage. Just ring them up, and either lower the monthly amount or ask them to tap the credits first before resuming monthly deductions from your bank account.
My experience with one relative is that the suppliers are very accommodating on this. You certainly do not need to close your account with Electric Ireland to claim back this credit.
Microgeneration credit
But that’s incidental. You appear to be more concerned about this tax credit which you can claim on energy that you have sold back to the grid through Electric Ireland over the past three years.
In general, any income you make from selling energy to an operator is taxable income, just like any other earnings during the year. But, as you say, as an incentive for people to invest in renewables, the Government has decided that the first €400 you make from selling your surplus energy back to the grid should be exempt from tax.
You are also correct that the €400 figure applies for 2024 and 2023, with the figure for 2022 being €200.
Where things go slightly awry is where you start wondering how to claim this money and talk of VAT numbers and having to close your account. That’s not how it works.
It is worth noting that there is no obligation for you to be in credit with your electricity provider
First up, as a private residential customer, you do not need to worry about VAT numbers – not least because you don’t have one.
In the normal course of events, we have to return details of our income to Revenue. For those of us who are PAYE, our employers do that for us. However, if we have additional income or, more frequently, we wish to claim for certain expenses like health costs, college fees, mortgage or rent tax credits etc, we are required to make a tax return.
Microgeneration delivers us extra income.
Unusually, the Government has decided that for the microgeneration tax exemption, they will not require such a return, as long as your “profit” from solar – ie the amount you sell back to the supplier – does not exceed the exemption.
So if you made less than €400 from selling power back to Electric Ireland last year, good luck to you and there is no need for paperwork. However, if you made €500, you do need to make a return but only for the €100 in excess of the exemption.
Whatever you put on the return, Revenue will assume it is over and above the exemption amount and assess your tax you accordingly.
So it is not a case of claiming this money back: you already have the money – in the form of credits with Electric Ireland.
In general, any income you make from selling energy to an operator is taxable income
However, if that €2,000 in credits has built up over just the last three years from microgeneration, you have some tax returns to make – and some tax to pay.
You will need to break down how much was sold to Electric Ireland each year but, even in blunt figures, the tax exemption for the past three years amounts to €1,000 (2 x €400 + 1 x €200). That means at least €1,000 of the credit you have with Electric Ireland is liable to tax, USC etc.
So what now? The first thing is always to get to Revenue before they get to you. You need to file a 2022 tax return if you made more than €200 that year from microgeneration, and returns for 2023 and 2024 if microgeneration saw you sell more than €400 back to Electric Ireland.
If you have already made returns and that income is not included, you’ll need to file amended returns.
Far from being owed money on microgeneration, it appears you may owe some tax on the credit you have banked from it.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com with a contact phone number. This column is a reader service and is not intended to replace professional advice
