Section 200, Schedule 42: Climate Change Levy: Supplies Subject to Carbon Price Support Rates Etc.
Summary
1.Section 200 introduces Schedule 42 which amends Schedule 6 (Schedule 6) to the Finance Act 2000 to provide for the introduction of the carbon price floor in Great Britain, as it applies to coal and other solid fossil fuels, gas and liquefied petroleum gas (LPG) used in most forms of electricity generation, with effect from 1 April 2013. The Schedule is split into four parts:
Part 1 repeals the carbon price floor provisions set out in Finance Acts 2011 and 2012, from 26 March 2013.
Part 2 re-enacts the previous legislation in this Schedule in an amended and consolidated form, with effect from 1 April 2013. It provides for the carbon price support (CPS) rates of climate change levy (CCL) (‘the CPS rates’) and sets the rates for 2013-14. It sets out the scope of the tax and provides for the Commissioners for HM Revenue & Customs (HMRC) to make regulations to give effect to the tax.
Part 3 sets the CPS rates for 2014-15 with effect from 1 April 2014.
Part 4 sets the CPS rates for 2015-16 with effect from 1 April 2015.
Details of the Schedule
Part 1 – Earlier provision not to have effect
2.Paragraph 1 repeals all previous carbon price floor primary legislation, which was set out in section 78 of, and Schedule 20, to the Finance Act 2011 and Parts 1 and 2 of Schedule 32 to the Finance Act 2012.
Part 2 – New provisions having effect from 1 April 2013
3.Paragraph 3 inserts references to four new paragraphs of Schedule 6 into paragraph 4(2)(b) of Schedule 6 to provide that references to taxable supplies include deemed supplies subject to the CPS rates.
4.Paragraph 4 inserts a new sub-paragraph (2A) into paragraph 5 of Schedule 6 to make the electricity produced by exempt unlicensed electricity suppliers liable to the CCL if their generating capacity is above 2 megawatts (MW) and they are producing electricity from commodities that are subject to the CPS rates or would be subject to such CPS rates if these applied in Northern Ireland.
5.Paragraph 5 inserts references to four new paragraphs of Schedule 6 into paragraph 6(2A) of Schedule 6 to provide that CCL is chargeable on deemed supplies of gas used in electricity generation.
6.Paragraph 6 amends paragraph 14 of Schedule 6 (exemption for supplies to electricity producers):
Sub-paragraph (2) amends sub-paragraphs (2)(b) and (3)(b) to extend the exemption from the main rates of CCL to auto-generators and exempt unlicensed electricity suppliers with a generating capacity above 2MW.
Sub-paragraph (3) inserts new sub-paragraph (3ZA) to exclude stand-by generators from the scope of the exemption.
Sub-paragraph (4) inserts new sub-paragraph (3B) to clarify that the exemption from CCL for supplies of coal and other solid fossil fuels, gas and LPG to generating stations does not apply to deemed supplies of these commodities that are subject to the CPS rates.
Sub-paragraph (5) removes unnecessary definitions which are now defined in amended paragraph 147 of Schedule 6.
7.Paragraph 7 inserts new sub-paragraph (4A) into paragraph 15 of Schedule 6 (exemption for supplies to combined heat and power stations) to clarify that the exemption from CCL for supplies of coal and other solid fossil fuels, gas and LPG does not apply to deemed supplies of these commodities that are subject to the CPS rates.
8.Paragraph 8 amends paragraph 17 of Schedule 6 (exemption for self-supplies of electricity) to remove the exemption from CCL on self-supplies of electricity when made by auto-generators and exempt unlicensed electricity suppliers that are not CHP stations, stand-by generators or small generating stations. It provides that partly exempt CHP stations will continue to be liable to CCL on self-supplies that do not qualify for exemption under regulations made by HM Treasury (the Climate Change Levy (Combined Heat and Power Stations) Regulations 2005).
9.Paragraph 9 amends paragraph 21 of Schedule 6 (regulations to avoid double charges to levy) to exclude deemed supplies of coal and other solid fossil fuels, gas and LPG used to generate electricity from the scope of the power to make regulations to avoid double charging.
10.Paragraph 10 inserts four new paragraphs into Schedule 6:
New paragraph 24A provides that when commodities subject to the CPS rates are brought onto, or arrive at, an electricity generating station in Great Britain that is not a CHP station, a small generating station or a stand-by generator, the owner of the station will be deemed to have made a supply of those commodities to himself.
New paragraph 24B provides that when commodities subject to the CPS rates are brought onto, or arrive at, a CHP station in Great Britain that is not a small generating station, the operator of the station will be deemed to have made a supply to himself of the quantity of the commodities that are referable to production of electricity.
New paragraph 24C provides that if a quantity of a commodity is treated as not being referable to the production of electricity and it is later determined that it was so referable and should have been the subject of a deemed supply under new paragraph 24B, the operator of the station is deemed to make a deemed self-supply of that quantity.
New paragraph 24D authorises the Commissioners for HMRC to make regulations to give effect to new paragraphs 24A to 24C and 42A to 42D.
11.Paragraph 11 inserts new paragraph 38A into Schedule 6 to provide that deemed supplies of commodities subject to the CPS rates are to be treated as taking place when the fuel is brought onto, or arrives at, the generating station or CHP station. It also provides that where there is a deemed supply because it is later determined that a quantity of a commodity should have been the subject of a deemed supply or because the amount of CCL paid on the original deemed supply was too low, the time of supply is treated as taking place upon the later determination.
12.Paragraph 12 makes consequential amendments to paragraph 39 of Schedule 6 (regulations as to time of supply) to provide that the Commissioners for HMRC may make regulations as to the time of supply under the new deemed supply provisions set out in this Schedule.
13.Paragraph 13 inserts new sub-paragraph (1B) into paragraph 42 of Schedule 6 (amount payable by way of levy) to provide that the main, reduced and lower rates of CCL set out in sub-paragraph (1) do not apply to deemed supplies of commodities used to produce electricity.
14.Paragraph 14 inserts four new paragraphs into Schedule 6:
New paragraph 42A provides that, for deemed supplies of commodities used to generate electricity under new paragraphs 24A and 24B, the rates of CCL that apply are the CPS rates, subject to the provisions of new paragraphs 42B and 42C. It sets out the CPS rates, which are expressed in monetary amounts per unit of each fossil fuel.
New paragraph 42B provides that, in the case of the CPS rate on coal and other solid fossil fuels, the rate is to be calculated with reference to the gross calorific value. It also provides that the gross calorific value of any coal slurry content from a coal mine is to be left out of the calculation of the calorific value, in effect exempting coal slurry from a coal mine from the CPS rate for coal.
New paragraph 42C makes various provisions for reductions in the amount of CPS rates payable where carbon capture and storage technology is installed by electricity generators.
New paragraph 42D provides for a further deemed supply where it is later determined that the amount of levy paid on an initial deemed self-supply was too low. The amount payable on the further deemed supply is the difference between what was originally paid on the first deemed supply and what ought to have been paid.
15.Paragraph 15 inserts new sub-paragraph (aa) into paragraph 55(1) of Schedule 6 (notification of registrability) to provide that a person who expects to make deemed self-supplies of commodities used to generate electricity must ( if not already registered for CCL) notify the Commissioners for HMRC of that fact.
16.Paragraph 16 inserts three new sub-paragraphs into paragraph 62 of Schedule 6 (tax credits) to enable the Commissioners for HMRC to make regulations providing for a credit in cases where a commodity on which the CPS rate has been paid is removed from the site of a generating station or where there has been an overpayment on deemed supplies subject to the CPS rates.
17.Paragraph 17 makes consequential amendments to paragraph 146 of Schedule 6 (regulations and orders) relating to when Treasury Regulations must be made under the draft affirmative procedure in respect of the description of an exempt unlicensed supplier.
18.Paragraph 18 inserts new definitions arising from this Schedule into paragraph 147 of Schedule 6 (interpretation) and makes consequential amendments arising from the amendments made by paragraph 17 of the Schedule.
Paragraph 19 inserts new paragraphs 152A and 152B into schedule 6:
New paragraph 152A defines an exempt unlicensed electricity supplier as a person who has an exemption under the Electricity Act 1989 or the Electricity Supply (Northern Ireland) Order 1992.
New paragraph 152B defines a small generating station as a generator of not more than 2MW generating capacity and provides that, in determining whether a generating station is a small generating station, the capacity is considered to be the combined generating capacity of all generating stations, other than CHP stations and stand-by generators, owned by a person or connected persons and, in the case of CHP stations, all stations covered by the same CHPQA certificate taken together.
19.Paragraph 20 makes consequential amendments to Regulation 5 of the Climate Change Levy (Electricity and Gas) Regulations 2001 by correcting the references to paragraphs in Schedule 6 that relate to “exempt unlicensed electricity supplier” as a result of changes made to Schedule 6 by this Schedule.
20.Paragraph 21 provides for Part 2 of this Schedule (paragraphs 2 - 22) to come into force on 26 March 2013.
21.Paragraph 22 provides that amendments made by paragraphs 6(2) and (3) of this Schedule are to have effect for the purpose of determining if a supply of gas or electricity is exempt from levy where it is actually supplied on or after 1 April 2013 and, in the case of any other supply, whether it is exempt from levy where the supply is treated as taking place on or after 1 April 2013. It also provides that amendments made by paragraph 8 of this Schedule are to have effect for the purpose of determining if a supply of electricity is exempt from levy where it is consumed on or after 1 April 2013 and that amendments made by paragraph 10 of this Schedule have effect in relation to supplies of CPS commodities (coal and other solid fossil fuels, gas and LPG) brought on to or arriving at a site on or after 1 April 2013.
Part 3 – Carbon price support rates from 1 April 2014
22.Paragraph 23 amends paragraph 42A of Schedule 6 to set out the CPS rates for the year commencing 1 April 2014.
Part 4 – Carbon price support rates from 1 April 2015
23.Paragraph 24 amends paragraph 42A of Schedule 6 to set out the CPS rates for the year commencing 1 April 2015.
Background
24.The CCL came into force on 1 April 2001 with the purpose of encouraging energy efficiency. The main primary legislation is set out in Schedule 6 to the Finance Act 2000. Among the exemptions from the tax are those for taxable commodities used in generating electricity.
25.In order to encourage new and additional investment in low-carbon power generation, the Government announced at Budget 2011 that, following consultation, it would introduce a carbon price floor from 1 April 2013, which it would achieve by amending CCL legislation (and fuel duty legislation for oils used in electricity generation since oils are not subject to CCL). Supplies of coal and other solid fossil fuels, gas and LPG used in most forms of electricity generation would become liable to newly created CPS rates of CCL, which would be different from the main CCL rates levied on consumers’ use of these commodities (and electricity). The amount of fuel duty reclaimable on oil used in electricity generation would be adjusted to establish new CPS rates of fuel duty. The changes needed to fuel duty are all set out in separate secondary legislation and are not covered in this Schedule.
26.The Government announced at the Autumn Statement on 5 December 2012 that, subject to discussions with the European Commission, Northern Ireland will be exempt from the carbon price floor. This exemption was confirmed at Budget 2013.
27.Schedule 20 to the Finance Act 2011 and Schedule 32 to the Finance Act 2012 amended Schedule 6 to provide for the setting up of the CPS rates of CCL. Following further informal consultation since Budget 2012 the need for further changes to carbon price floor legislation has been identified to meet industry concerns. These changes are set out in the Tax Impact and Information Note published on 11 December 2011. Since the changes would have necessitated significant amendments to the earlier legislation set out in Finance Acts 2011 and 2012 that had not yet come into force, the earlier legislation is being repealed and replaced by this Schedule. This will consolidate all primary legislation for the carbon price floor into this one Schedule.
