Community energy sector drops threat of legal action on tax relief

The government has responded to the threat of legal action from Community Energy England (CEE) about removal of tax relief from community energy enterprises. In reply to CEE’s pre-action...

The government has responded to the threat of legal action from Community Energy England (CEE) about removal of tax relief from community energy enterprises.

In reply to CEE’s pre-action letter, HM Treasury conceded it gave only five weeks’ notice of the change, and not the six months promised in the Budget.

But government lawyers said an earlier ministerial statement that it was “monitoring” the schemes had in effect given community energy enterprises notice that the policy might be changed without this grace period.

The community energy sector rejects this, and believes a court would too. However it will not pursue the matter to judicial review.

Instead it will “help the Treasury become better informed about the benefits of bone fide community energy schemes so it can reconsider its approach to Social Investment Tax Relief (SITR) when this is expanded in 2016”.

“We’re disappointed that HM Treasury refused to provide the results of its monitoring to justify its U-turn,” says CEE chairman Philip Wolfe. “It offered just one document, but only if we kept it secret. This isn’t a national security matter, so we’ve concluded that the evidence is too weak to be published.”

An estimated £12m of community share offers were funded in the five-week window before EIS was withdrawn on 30 November, but the deadline was too tight for many projects.

“Many excellent community projects will not now proceed,” says Nicholas Gubbins, chief executive of Community Energy Scotland, which supported the pre-action letter. “This is not only a sad waste of time and money already expended, but also a loss of millions of pounds worth of future community benefits.”

The Treasury is concerned about commercial organisations posing as community interest companies to take advantage of SITR.

Chris Blake, chairman of Community Energy Wales, which also joined the action, said: “While we share this concern, surely government can police this by proper drafting of legislation and regulation of the sector. As things stand, bona fide social enterprises are becoming collateral damage in a heavy-handed move to prevent abuse.”

Philip Wolfe added: “The response suggests that the Treasury is not well informed about the community benefits which our members offer or the risks inherent in developing these projects.

“Our research shows that a sample of 80 community energy schemes are providing £25m in community benefits and engaging 11,000 people.”

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