Community energy schemes under threat

Work gets underway on the turbine house near Alt Breugach near Applecross
Work gets underway on the turbine house near Alt Breugach near Applecross

Cutting tax relief for investors in community energy projects will make it “very difficult” for these schemes in the future, the local development officer for Applecross in Wester Ross said this week.

Alison Macleod, who is LDO for the community company, said the UK Department of Energy and Climate Change had scrapped the 50 per cent tax relief available to those who invested the first £150,000 in a particular renewable energy scheme.

“We had thought that the Enterprise Investment Scheme, which allows the rest of the investors 30 per cent tax relief, was going to be changed to a new arrangement called Social Investment Tax Relief,” she added. “However, DECC has decided that community energy schemes wonÕt be eligible for SITR, so there will be no tax relief to attract investors at all.

“This means there is no point extending the shares issue into December as we intended to. And it’s going to make it very difficult for the community schemes that are still getting things set up and planning share offers in the next year or so.”

Lochbroom Community Renewables Ltd are one such organisation who are now struggling to raise the necessary capital for their £800,000 hydro project on Allt Õ Mhuillin. It had been the intention to raise the whole amount through a similar community share scheme to the one offered in Applecross.

Company secretary Andy Kaye said the UK Government had behaved in a “reprehensible” manner  by unilaterally deciding to axe tax relief.

“Governments are very good to the nuclear industry but as this change disadvantages shareholders it will seriously affect community renewables,” he added. “We will have to see where we go from here.”

The changes were announced in the House of Commons last week by David Gauke, financial secretary to the Treasury, which is the lead department.

This week, a spokesman for the Treasury said: “The government is committed to supporting the investment and innovation needed to achieve a cost-effective transition to a low-carbon economy, but we also want to do this in a way that is fair and provides value for money to hardworking taxpayers.

“The venture capital schemes are designed to deliver investment into high-risk and innovative businesses that need funding to develop and grow. We are aware of significantly-increased interest in the use of subsidised community energy for low-risk tax planning purposes, which is why we have made changes to these schemes to ensure they remain effective at delivering investment to high-risk businesses that need funding to develop and grow.”

The spokesman was asked how scrapping tax relief was meant to ensure the delivery of investment.

In reply he said: “The Government is concerned that the presence of low-risk investment opportunities crowds out higher-risk investments to companies that need funding across a wide range of sectors in order to develop and grow.”