Posted by James Pearson on 23 May 2014

Green Energy Tax Breaks: Deadline Looms

The 2014 Budget outlined forthcoming changes to the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trust (VCT) Scheme that will take effect when the 2014 Finance Bill receives Royal Assent (expected July 2014).

Investors in EIS, SEIS or VCT schemes receive income tax relief on the money they invest: They can deduct up to 50% of their qualifying SEIS investment and 30% of their qualifying EIS and VCT investment from their income tax liability in the year of investment. Shares within these schemes are also free from Capital Gains Tax when they are sold (subject to minimum term of holding). These generous reliefs mean that these schemes can be very attractive provided that the right investments can be found.

EIS and VCTs: Important Changes for Companies in the Green Energy Sector

In recent years there has been a concerted effort to attract investment under these schemes by the green energy sector, especially companies that are involved in the manufacture and installation of solar panels. These investments offer significant tax relief for a stake in a growth industry with the additional benefit of driving environmentally friendly technologies.

However, anyone looking to make EIS, SEIS or VCT investments in the green energy sector is running out of time due to changes introduced in the 2014 Finance Bill.

Shares issued in companies that benefit from Department of Energy & Climate Change (DECC) Renewable Obligations Certificates or Renewable Heat Incentive subsidies after Royal Assent will no longer be eligible for the EIS, SEIS or VCT schemes due to the financial incentives and rewards received through these alternative programmes.

If you are interested in investing in one of these companies and want to benefit from EIS, SEIS or VCT tax relief for doing so, you should be certain that the shares are issued prior to the 2014 Finance Act receiving Royal Assent.

Renewables Obligation Certificates (ROCs) are green certificates issued to operators of accredited renewable generating stations (including photovoltaic solar panels, wind turbines & farms, anaerobic digestion, hydro generating stations etc.) for the eligible renewable electricity they generate.

The Renewable Heat Incentive (RHI) is a Government scheme set up to encourage uptake of renewable heat technologies (such as ground source heat pumps, biomass generators etc.) through the provision of financial incentives.

Contact us if you would like to know more about these changes.

If you would like any advice regarding the above article or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or customerservice@taxinnovations.com