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Finance Act 2012

Background Note

57.CCL is a tax on the non-domestic use of energy.

58.Under the CCA scheme introduced in 2001, specified energy intensive businesses were allowed to enter into agreements with the Department of Energy and Climate Change (DECC) to meet energy efficiency or emission reduction targets and, as a result, were entitled to pay the reduced rate of CCL on all taxable commodities. The existing CCA scheme is due to come to an end on 31 March 2013. The Government intends to extend the scheme to 2023.  Schedule 31 makes changes to simplify the scheme’s administration.

59.The reduced rate of CCL is currently 35 per cent for supplies of all taxable commodities.  Schedule 30 amends this rate on supplies of electricity only to 10 per cent from 1 April 2013 to help mitigate the impacts of the carbon price floor on energy-intensive industry.

60.Schedule 30 amends the rates of levy from 1 April 2013, necessitating a corresponding increase to the lower rate on gas in Northern Ireland. The Schedule also introduces a 20 per cent lower rate for supplies of taxable commodities for use in certain aluminium and steel recycling processes from 1 April 2012 following State aid approval.

61.Budget 2011 announced that, following consultation, the Government would introduce a carbon price floor on 1 April 2013. This will be achieved by taxing fossil fuels used in electricity generation under the existing CCL and fuel duty regimes. Legislation to implement this policy in respect of CCL was enacted as section 78 of, and Schedule 20 to, the FA 2011. The section and Schedule 31 contain further legislation announced at Budget 2012 arising from further consultation with business after Budget 2011.

62.In April 2003 the CCL exemption for CHP-produced electricity supplied directly from the station that produced it to a final energy consumer was extended to include indirect supplies from a CHP (i.e. electricity supplied to an energy consumer other than by the CHP station that produced it).  Following the proposed introduction of the carbon price floor and the expiry on 31 March 2013 of State aid approval for the indirect supplies element of the CHP exemption, Budget 2011 announced that from 1 April 2013 the indirect supplies exemption would end.  However, in circumstances where electricity utilities have a credit balance of levy exemption certificates (which are used to evidence the production of CHP electricity), the Government will continue to allow CCL-exempt supplies to be made in order to use up that credit balance, but only until 31 March 2018.

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