Community energy sector “in shock” following tax relief decision

Community energy projects have been thrown into disarray following the news that tax relief will end for subsidised schemes, industry figures have told Public Sector Energy.

Speaking in Parliament on 26 October, the Financial Secretary to the Treasury, David Gauke, said the Government plans to “introduce secondary legislation to exclude subsidised renewable energy generation by community energy organisations.”

The Minister said they plan to remove EIS, SEIS and SITR tax relief measures for subsidised projects from 30 November.  

“This follows the announcement in the summer Budget that the Government would continue to monitor the use of the venture capital schemes by community energy to ensure that the schemes were not subject to misuse and that they provided value for money to the taxpayer,” said Mr Guake.

“All these changes on energy activities will take effect for investments made on or after 30 November. The Government intends to apply all these exclusions to the social investment tax relief when SITR is enlarged.”

Speaking to Public Sector Energy, the Campaigns Director at the 10:10 Group, Leo Murray said the community energy sector is in “shock” following the announcement.

“People are just dumbfounded that this is coming on the back of other things,” said Mr Murray.

He said the end of EIS tax relief for community energy projects was widely expected and the Budget in March contained a commitment to a grace period while it was being phased out.

Mr Murray said many in the sector believed EIS would be maintained until the SITR scheme was expanded to include community energy projects.

He added it is not clear how this will affect projects with EIS approval, which are currently trying to raise funds.

“Everybody has been planning on the basis that SITR would be available,” said Mr Murray. “Everyone has been thrown into disarray.”

Co-operatives UK Policy Officer James Wright said it was a “complete reversal” of previous Government announcements.

“We had expected that an expanded SITR would be opened to community energy schemes, while EIS would continue for six months after changes to SITR gained State Aid approval,” said Mr Wright.

"Given that we fought so hard last year to secure continued support for community investment in renewables, including providing clear evidence of just how important it is, and have been given numerous assurances from government, this is a really heavy blow for our members, and for us at Co-operatives UK."  

A Treasury spokesman said:I can confirm that investments in community energy projects benefiting from subsidies for the generation of renewable energy will no longer be eligible for tax reliefs provided through the Enterprise Investment Scheme, Seed Enterprise Investment Scheme and Venture Capital Trusts scheme with effect for shares issued on or after 30 November. 

“The exclusion will be extended to the Social Investment Tax Relief when SITR is enlarged. Investments made before this date will continue to be eligible for the reliefs.”

Jamie Hailstone is a freelance journalist and author, specializing in local government, transport and energy issues