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Climate change levy exemption removed in Budget

The climate change levy (CCL) exemption for renewably sourced electricity is to be removed, chancellor George Osborne has announced in his latest Budget.

There will be a transitional period, the length of which is to be confirmed, for suppliers from 1 August to claim the CCL exemption on any renewable electricity that was generated before that date.

The coalition Government’s commitment to increasing the proportion of revenue from environmental taxes has been dropped.

The Government will reinstate exemptions from the aggregates levy, found lawful by the European Commission. It means that businesses will, from 1 August, be able to stop paying tax on exempted materials and reclaim tax paid on these since the exemptions were suspended in April 2014.

A consultation will be launched in the autumn into the business energy efficiency tax landscape to consider approaches to simplify and improve the effectiveness of the regime.

Osborne said in his Commons speech: “Now we have a lon- term framework for investment in renewable energy in place, we will remove the outdated CCL exemption for renewable electricity that has seen taxpayer money benefitting electricity generation abroad.”

Paul Raynes, director of policy at manufacturers’ organisation EEF, said: “Industry will welcome a review of energy taxation and levies. Fifteen years of layering and tinkering with policy has left us with a vast patchwork of expensive, inefficient and incoherent policy drivers for decarbonisation.

“We urgently need to revisit the policy landscape to reduce costs, improve the business environment and better deliver on our policy objective of reducing emissions.”

The Institute of Environmental Management & Assessment’s (IEMA) policy and practce lead, Nick Blyth said: “This is far from a green Budget, and we have concern over the Government’s commitment to the green economy. The chancellor’s clear statement that the Government will not extend the coalition’s commitment to increasing the proportion of revenue from environmental taxes to this Parliament is a backwards step.  

“The announcement that the Government will review the business energy efficiency tax and carbon reporting landscape is received with caution. The majority of IEMA members do believe there is a need for the Government to rationalise the number of energy and carbon schemes affecting the very largest organisations, and we look forward to the autumn consultation.”

Other announcements in the Budget affecting businesses more broadly include:

  • a national living wage of more than £9 an hour by 2020
  • corporation tax cut to 19% in 2017 and 18% in 2020
  • annual investment allowance set at its highest ever permanent level at £200,000
  • employment allowance to increase by £1,000 to £3,000

Natalie Bennett, Green Party leader, said: “We have a Government that is making it even harder to establish and develop renewable energy projects, while ignoring the economic, social and environmental benefits of investing in providing warm, comfortable, affordable-to-heat homes for all.”

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