1.Section 118 provides for Schedule 59, which amends Schedule 6 to the Finance Act (FA) 2000, to provide for HM Revenue & Customs (HMRC) to recover climate change levy (CCL) where a facility in the climate change agreements (CCA) scheme does not meet the targets it has agreed with the Department of Energy and Climate Change (DECC). The recovery mechanism applies to certification periods under the CCA scheme beginning on or after 1 April 2009.
2.Subsection (1) introduces Schedule 59, and subsection (2) provides that the amendments made by the Schedule have effect where the certification period (under the CCA scheme) begins on or after 1 April 2009.
3.Paragraph 1 inserts a new paragraph 45B into Schedule 6 to FA 2000 to provide:
that the new paragraph applies to a facility in a CCA (sub–paragraph (1));
for the Secretary of State (in practice, for DECC) to issue a certificate in cases of unsatisfactory performance against targets agreed by a facility signing a CCA (sub-paragraph (2));
that the certificate must specify the facility, agreement, certification period, the target(s) and the progress made by the facility towards the target(s) (sub-paragraph (3));
that, where a certificate is issued, taxable supplies are treated as not being reduced-rate supplies and an amount is payable as levy on the supplies (sub-paragraph (4));
for calculating the amount payable on the taxable supplies (sub–paragraph (5));
that the certificate must be sent to the Commissioners for HMRC and the operator of the facility (sub–paragraph (6));
that a certificate may be issued after the end of the certification period (sub-paragraph (7));
that the facility operator must not be required to pay the levy due under new paragraph 45B before the certificate is issued (sub-paragraph (8));
that the levy due under the paragraph is additional to levy already due on the supply (sub-paragraph (9)); and
for definitions of terms used in the new paragraph (sub–paragraph (10)).
4.Paragraphs 2 to 9 make consequential amendments to Schedule 6 to FA 2000.
5.CCL was introduced in 2001 and is a UK wide tax on the use of electricity, gas, solid fuel and liquefied gases used for fuel purposes by business and the public sector.
6.The purpose of the CCL is to encourage the efficient use of energy and the use of renewable energy, in order to help meet the UK’s international and domestic targets for cutting emissions of greenhouse gases.
7.CCAs were introduced alongside the levy in recognition of the levy’s impact on the competitiveness of energy-intensive sectors of industry. They are voluntary agreements made between the DECC and sector associations and their members. The agreements entitle participating facilities to pay a reduced rate of levy in return for meeting challenging targets for improving energy efficiency or reducing emissions.
8.The CCA scheme is a State Aid. A condition of the State Aid approval for the scheme in 2001 was that, for the last two years of the 10 year approval (1 April 2009 to 31 March 2011), the UK must introduce a mechanism to recover tax from facilities that fail to meet their targets during the period proportional to the extent that the targets were missed.