People will no longer be able to invest in tax-efficient schemes that benefit from government renewable energy subsidies after the passage of the Finance Bill (Budget) scheduled for July 2014.
Currently, many Enterprise Investment Schemes (EIS) and venture capital trusts (VCTs) – which benefit from a number of tax reliefs – invest in renewable energy projects, particularly solar.
Guaranteed income via renewables obligation certificates (ROCs) or renewable heat incentives reduces investment risks and has attracted EIS managers, incuding Foresight and Octopus Investments.
EIS investors receive 30% income tax relief and after two years, investments are exempt from inheritance tax (IHT). Capital gains are tax-free after five year and capital gains tax can be deferred for up to three years.
In the Budget statement, the Government said that it had broader concerns about the ‘use of contrived structures to allow investment in low-risk activities that benefit from income guarantees via government subsidies.”
Investors in schemes set to be affected by these rule changes will not lose any tax relief they currently enjoy.
However, any investments made into one of these funds after the passage of the finance bill would not qualify and would be subject to normal rates of tax.