UK: Budget 2011 Clean Energy Summary

Last Updated: 28 March 2011
Article by Michelle T. Davies

Budget 2011 Summary

In the Chancellor's 2011 Budget published on 23 March 2011, it was stated that the Government is committed to being the greenest Government ever and sees support for the low carbon economy as central to providing a platform for strong, long term sustainable growth. It is one of the aims of Budget 2011 to increase the proportion of tax revenue accounted for by environmental taxes.

As such, Budget 2011 announces:

Enhanced capital allowances scheme for energy-saving technologies

The energy-saving enhanced capital allowance scheme will, subject to State aid approval, be updated during summer 2011. The main change includes the addition of a new technology-efficient hand dryer.

Capital allowances on Feed in Tariff (FIT)

HMRC have acknowledged that there is some uncertainty over the rate at which capital allowances may be claimed. It is, therefore, proposed to introduce legislation to clarify the availability of capital allowances and the rate of capital allowances for expenditure on plant and machinery covered by the FITs and Renewable Heat Incentive schemes to ensure certainty over treatment. There will be consultations on this measure and the consultation document is expected to be published in May 2011 with a view to introducing legislation in the Finance Bill 2012.

Carbon price floor

The Government confirmed a carbon price floor that will come into effect on 1 April 2013. The carbon price floor will tax fossil fuels used in electricity generation under the climate change levy and fuel duty. The floor price will begin at £16 per tonne in 2013 and rise to £30 a tonne by 2020.

EIS / VCT Schemes

Measures affecting solar companies only:

Currently HMRC accept that a company whose main business is the receipt of FIT payments is a "qualifying company" for the purposes of these reliefs. However, it has been announced that legislation will be introduced in the Finance Bill 2012 to state that companies whose trade consists wholly or mainly in the receipt of FIT payments (or similar subsidiaries) will only be eligible for these schemes if the commercial electricity generation has begun before 6 April 2012. Shares issued pre 23 March 2011 will not be affected by these changes.

Where new investors wish to claim EIS / VCT relief on their share subscriptions into solar companies those companies must have started generating electricity pre-6 April 2012. It is not yet clear whether a company which starts generating electricity pre-6 April 2012 will be affected if it starts generating electricity on new sites post 6 April 2012.

General changes to be introduced from 6 April 2012

In addition to the above a number of the tests to meet for EIS / VCT relief will be amended in the Finance Bill 2012 (including the size of the company pre-investment; the annual amount that may be invested through EIS / VCT; and the amount an individual may invest through the EIS scheme).

Changes to be made from 6 April 2011

The rate of income tax relief on investments made from 6 April 2011 will increase from 20% to 30%.

Climate change levy rates

Legislation will be introduced to increase the rates of climate change levy in line with the retail prices index from 1 April 2012.

Climate change levy exemption: certain forms of transport

The climate change levy exemption for taxable commodities used in rail freight will be suspended from 1 April 2011 pending EU State aid re-approval. The exemption will be re-instated upon receipt of the further approval, with retrospective effect if the approval allows.

Climate change levy exemption: recycling processes

The exemption from the climate change levy for taxable commodities used in certain processes relating to the recycling of steel and aluminium is an approved State aid. The current approval expires on 31 March 2011 and the UK Government is seeking re-approval but cannot legally continue with the exemption beyond 1 April without European Commission approval.

Green Investment Bank

The government's flagship Green Investment Bank ("GIB") will launch in 2012, a year earlier than expected but GIB will not be able to borrow additional funds until 2015/16. The bank will be backed by £1bn of government funding and an additional £2bn raised from asset sales. This initial capitalisation will allow the bank to leverage an extra £15bn of private sector investment over the course of the parliament. It was confirmed that the bank would not be allowed to borrow until 2015/16 and, even then, only if the government's debt targets are met.

Company Car Tax rate 2013-14

The appropriate percentages will be reduced by 1% for all vehicles with carbon emissions between 95g and 220g from April 2013. Zero emissions cars will remain at 0% and ultra low emissions cars with emissions up to 75g will remain at 5%.

Fuel duty rates

  •  the main fuel duty rate will be reduced by 1 penny per litre (ppl) from 6pm on 23 March 2011
  • the 1 April 2011 increase will be deferred and implemented on 1 January 2012 when the main fuel duty rate will increase by 3.02 ppl
  • on 1 January 2012 the effective rate of duty for non-road fuels will rise in proportion to the main fuel duty rate; the duty increases on natural gas will maintain the differential with the main road fuels, and the differential for road fuel gas other than natural gas will be reduced by the equivalent of 1 ppl of petrol and
  • on 1 January 2012 the duty rate for leaded petrol will increase by the same monetary amount as main fuel duty, and the duty rate for aviation gasoline will rise in proportion to the main fuel duty rate.

The duty differential for biodiesel produced from used cooking oil will end as intended on 31 March 2012.

Landfill tax

The standard rate of landfill tax will be increased by £8 per tonne for disposals made, or treated as made, to landfill on or after 1 April 2012, increasing the rate to £64 per tonne.

Planning

The 2011 Budget included a section on planning reform. This included:

  • 21 new enterprise zones to be created with tax breaks, simplified planning and discounted business rates
     
  • a presumption in favour of sustainable development in the planning system
     
  • fast tracking of major infrastructure schemes

New Changes Subject to Consultation

Capital allowances: feed-in tariffs and renewable heat incentives

The renewable heat incentive (RHI) scheme is due to be introduced in summer 2011 and will sit alongside the FITs regime to incentivise heat generation from renewable sources. Where the electricity and heat generation is undertaken by a business, the business may also be able to claim capital allowances in respect of expenditure on the generating equipment.

Reform of climate change agreements

The scheme will be extended to 2023 and the current 54 participating sectors will continue to be eligible for the scheme. From 1 April 2011, CCA facilities will pay a reduced rate of CCL of 35 per cent on all taxable commodities. For electricity supplies only, this reduced rate of CCL will be amended from 35 per cent to 20 per cent from 1 April 2013.

Aviation tax consultation

A consultation with proposals for reform of Air Passenger Duty from April 2012 was published. The Government has also announced its intention to tax business jets.

For further information or advice, please contact:

Michelle Thomas
Partner
Tel: 0845 498 7553
michellethomas@eversheds.com

Deneze Hastings
Partner
Tel: 0845 497 8223
denezehastings@eversheds.com

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions