Section 36 and Schedule 6: Investment Reliefs: Excluded Activities
Summary
1.This section and Schedule exclude all types of renewable energy generation activities subsidised by the government from the scope of the venture capital schemes – the Seed Enterprise Investment Scheme (SEIS), the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs). It makes provision for activities involving the generation of energy for which a Feed-in Tariff is receivable to be eligible for social investment tax relief (SITR), and provides a power to use secondary legislation to amend the activities that are not eligible for SITR. The legislation provides for different provisions to take effect at different times.
Details of the Section
2.Section 36 introduces Schedule 6, which is made up of four Parts.
Details of the Schedule
Part 1
3.Paragraph 1 introduces new section 257MW of the Income Tax Act (ITA) 2007. The power allows the list of activities that are excluded from qualifying for SITR to be amended by regulations. The new power allows regulations to take effect retrospectively (but no earlier than 6 April 2015) where the activities become newly eligible for the SITR, that is, where the regulations are wholly relieving.
4.Subsection (5) of new section 257MW provides for regulations made under this section to be combined in the same statutory instrument with regulations made under other powers in new section 251A, section 257MB and section 311. As a result, it would be possible to use one statutory instrument to amend the excluded activities for SITR, EIS (and SEIS) and VCTs at the same time.
Parts 2 and 3
5.Parts 2 and 3 of the Schedule exclude from the EIS, SEIS (by virtue of section 257DA of ITA 2007) and VCTs companies generating power whose activities involve anaerobic digestion or hydroelectric power for which a government subsidy is obtained.
6.The provisions also exclude activities where the generation of the electricity is carried on in connection with a Contract for Difference, a new government subsidy that will replace Renewables Obligations Certificates (ROCs) and Renewable Heat Incentives (RHIs) in due course, or similar scheme outside the UK. Activities involving ROCs and RHIs are already excluded activities for the purposes of the venture capital schemes.
7.The changes in Parts 2 and 3 will take effect on and after 6 April 2015.
Part 4
8.Part 4 of the Schedule makes further provision on excluded activities for the EIS (and the SEIS by virtue of section 257DA of ITA 2007) and VCTs. However, unlike the changes in Parts 2 and 3 of the Schedule, the changes in Part 4 will take effect on a date specified by HM Treasury regulations.
9.Paragraphs 10 and 11 of the Schedule make provision to remove the exception that currently allows all types of subsidised energy generation activities by certain types of community organisations to qualify for the venture capital schemes.
10.The effect of paragraphs 10 and 11, taken together with Parts 2 and 3 of the Schedule, will be to exclude all activities involving subsidised energy generation from the EIS, SEIS and VCTs.
11.Paragraph 13 of the Schedule makes provision to amend the list of excluded activities for SITR. The export or generation of electricity subsidised by way of a Feed-in Tariff will no longer be an excluded activity.
Background Note
12.The purpose of these provisions is to:
exclude from the venture capital schemes (EIS, SEIS and VCTs) companies that can currently benefit from government subsidies on activities involving the generation of energy; and
extend the activities allowed under SITR once State aid clearance for the enlargement of SITR is received.
13.Subsidised energy generation activities involving anaerobic digesters, hydroelectric power and Contracts for Difference will be excluded from the venture capital schemes with effect from 6 April 2015.
14.However it is the government’s intention that the special provisions for community groups involved in subsidised energy activities, to qualify under the venture capital schemes, will remain in place until State aid clearance is received for the enlargement of SITR.
15.When State aid clearance is received for the enlargement of SITR, the government intends to introduce regulations to bring into effect the provisions of this Schedule to:
exclude community energy activities from the venture capital schemes; and
allow community groups that would be eligible for SITR, but for the fact that they are carrying out excluded activities involving the generation of energy for which a Feed-in Tariff is due, to become eligible for SITR.
16.Budget 2015 announced that the government will allow a transition period of 6 months following State aid clearance for the expansion of SITR before such eligibility for EIS, SEIS and VCT is withdrawn.
17.When State aid clearance for enlargement of SITR is received, it is the government’s intention to use the power in new section 257MW of ITA 2007 to allow community organisations carrying out small-scale agricultural and horticultural activities, which will not be eligible for direct payments under forthcoming Community Agricultural Policy reforms, to qualify for SITR. Organisations with land holdings of less than 5 hectares in England and Wales and less than 3 hectares in Scotland and Northern Ireland would become eligible for SITR.
