HM Revenue and Customs (HMRC) have recently provided some guidance on the taxation of RHI income. You can read the full guidance here.
There are two separate schemes – Domestic RHI and Non-Domestic RHI. Both schemes have separate tariffs, conditions and processes, however both schemes provide subsidies in the form of payments to eligible renewable heat generators.
HMRC have stated that the tax payable is not affected by the type of scheme making the payment (i.e. domestic or non-domestic) but on how the heat is actually used.
Therefore, farmers who qualified for the non-domestic scheme but use the heat for the farmhouse in addition to any business use may not need to pay tax on the element relating to private use.
VAT and Capital Allowances should follow the same principle and claims should be made on the business element of the initial cost.