The government will be extending Enterprise Investment Scheme (EIS) tax relief to community energy co-operatives for another six months. This tax relief for investors was due to be removed for bona fide co-operatives on 6 April 2015.
The six-months extension was announced in the 2015 budget, presented by chancellor George Osborne on 18 March.
Under the EIS investors can receive 30% tax relief of the cost of the shares. Relief can be claimed up to a maximum of £1m invested in such shares. The Treasury is expanding social investment tax relief (SITR) as an alternative to EIS. However, the withdrawal of EIS will not occur until 6 months after state aid approval has been granted for SITR. The extension was welcomed by a coalition of community energy co-operatives and support bodies that have been campaigning for a transitional arrangement.
James Wright, policy officer at Co-operatives UK, said: “The shift in tax relief was a source of uncertainty for community energy organisations and their investors. The budget announcement means there may be a year’s extension to EIS for energy co-ops, giving them a degree of stability whilst the change occurs.”
“The work does not stop here of course. There is more to do to increase government understanding of the co-operative model, and this transitional measure that needs to be reinforced, longer term, with the introduction of an option for co-operatives to protect members’ investment with an asset lock, with associated eligibility for tax relief.”
Ramsay Dunning, general manager of Co-operative Energy, which lobbied for an extension, added: “We are pleased that the government has listened and provided a small extension to the phase-out of the tax relief currently enjoyed by investors in community energy co-operatives. However, longer term, we really do need to see an end to the constant stop and start in support for community energy in this country, which is incredibly demotivating to the hard working communities who are looking to build sustainable local solutions.”
The Social Investment Tax Relief (SITR) is available for investments made on or after 6 April 2014. Social enterprises must have fewer than 500 full-time equivalent employees and not more than £15m in gross assets immediately before the investment to qualify for 30% tax relief of the amount invested.