Osborne Budget cuts personal tax breaks for renewable energy schemes

 

George Osborne, MP, Chancellor
George Osborne, MP, Chancellor

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.

Pixie Energy

Pixie logo Pixie Energy is an incubator and a facilitator of strategic research and project work, focusing on energy regulation, policy and markets at the local and national level. Find out more about Pixie Energy here.

Local Energy Matters: Scotland

Local Energy Matters: Scotland is a free-to-download brochure with a focus on energy tariffs in the two Scottish electricity distribution regions, as well news on local energy and low-carbon schemes.

Previous editions can be download here.

Scottish energy market overview

You can read an overview of the Scottish energy market here.

Scottish Government energy feed