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UK Chancellor Abolishes Tax Breaks For Renewables Investors

Annabelle Williams, Investment Week

Renewable energy companies will no longer be able to give investors relief under venture capital scheme rules, George Osborne has announced in today’s Autumn Statement.

The change will apply to renewable energy companies already “substantially benefiting” from other government support. This could mean companies already recieving subsidies will no longer benefit from tax breaks as well.

“In order to better target the tax reliefs, the government will exclude all companies substantially benefiting from other government support for the generation of renewable energy from also benefiting from tax-advantaged venture capital schemes,” Osborne said.

The exception to this rule will be community energy generation undertaken by qualifying organisations – which could for example refer to local council schemes which encourage residents to take up solar energy.

Renewables regime

Venture capital structures have been hugely popular among renewable energyfunds, which alongside giving investors tax relief for investing in the fund, were also able to claim relief for each mega-watt of energy generated under the feed-in-tariff (FIT) programme. Other relief was available under the Renewables Obligations Certificates and Renewable Heat Incentives schemes.

The last several years have been a confusing time for venture capital investors as government rules surrounding relief have changed several times. In the Budget earlier this year, Osborne enhanced relief for seed enterprise investment schemes (SEIS) while cutting venture capital relief for lower risk renewables, which includes solar and wind power.

Investment in solar power had flourished since the FIT scheme of subsidies was launched in 2010, giving inflation-linked rates for electricity produced from renewable sources. The scheme proved so successful at stimulating wind and solar power schemes in the UK that the government cut the level of subsidy available in 2012.  The only renewables area left with generous subsidies was hydro power and anaerobic digestion, and a number of investment funds were launched.

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