91探花

The government is on a mission to invest in clean, home-grown energy with the Great British Energy Bill published last month. It promises to establish a new publicly-owned company which will invest and lead on energy projects that will help the government deliver on its 2030 clean energy commitments.

As Rachel Reeves looks to unlock additional funds for investment like this in the Autumn Budget, there is arguably a contradiction with the tax system as there is little to incentivise individuals to invest in green energy projects themselves. 

It has been around a decade since changes were made to deny tax relief on investments into renewables projects via Venture Capital Trusts and the Enterprise Investment Schemes. At the time, the government felt the reliefs from such investment were better targeted at projects with higher risks of return. As 91探花 has highlighted previously however, this approach of tightening tax reliefs can be contrasted with a number of other G7 countries which offer a variety of tax incentives to encourage investment in renewables.

Despite the lack of tax incentives, the last few years has seen the rise in individuals coming together in cooperatives to invest in renewable projects. One of the higher profile examples of a business seeking to bring together individuals to co-own wind farms and solar projects is to introduce changes in the Autumn Budget.

One of the perceived barriers is that the tax implications of any returns received from clean energy cooperatives are not immediately obvious and could prove a disincentive for some. Ripple Energy outline in their for a number of years. The outcome is that it has been agreed that profits from the cooperative should be taxed as savings income, effectively in the same way as interest. 

It is not immediately clear how that conclusion has been reached by HMRC and it may represent something of a gesture of goodwill as, for many, such income may fall within their savings allowance. As a result, some or all of the income may be free from tax. 

What it does highlight is an opportunity to clarify and simplify the rules. It would seem that the intent is there for HMRC to incentivise this type of investment but it is really for government to make such decisions through legislation and to clarify the position. 

One of Ripple’s requests is a call for the Chancellor to introduce legislation that allows individuals to receive clean energy cooperative profits tax free. That might be a step too far in this Autumn Budget, with the focus on bringing in tax revenues instead of introducing tax reliefs. But in shaping the Britain the Chancellor wants to build, she may need to look again at personal tax incentives for clean energy investment.