The Government has widened its ban on VCTs and enterprise investment schemes claiming renewable energy subsidies alongside their generous tax benefits.
In the Autumn Statement, the Government has said it will exclude all companies “substantially benefiting” from subsidies on renewables from also claiming the income and capital gains tax relief from tax-efficient investments.
There is a waiver for community renewable generation schemes.
A ban on solar and wind investments for tax-efficient investments was enacted in July after being unveiled in the Budget.
Tilney Bestinvest business development managing director Jason Hollands says it appears the Government has gone further.
“Essentially HM Revenue & Customs doesn’t want to give a tax incentive to reward low risk investment,” he explains.
Today’s Autumn Statement suggests a more general approach that captures other renewable projects not covered by these two specific schemes but which receive substantial state support.
“It could therefore have implications for other areas, such as certain hydro or anaerobic digestion projects.”
VCT houses spoken to by Fundweb say they are consulting advisers to understand the implications of the change.
Octopus Investments EIS business line manager John Thorpe says the scheme has been affected by numerous law changes since inception.
“At this stage, it’s too early to comment on the proposal set out in the Autumn Statement without further information,” he says.
”However, as the largest provider of EIS in the UK, we are used to changes and look forward to continuing to find attractive investment opportunities for our EIS investors. We have been active in the non-renewable energy sector for some time as we believe energy as a whole offers interesting opportunities for our investors.”
Triple Point principal Ben Beaton says investors will not be affected by the changes.
”We identified hydro as an attractive renewable energy proposition over four years ago and as such we have already completed all the necessary due diligence with six schemes now under construction,” he says.
“Consequently Hydro VCT investments will be made ahead of the 6 April deadline, ensuring investors are able to support the development of this portfolio of hydroelectric projects.”
Albion Ventures managing partner Patrick Reeve says he understands HM Revenue & Customs’ position, in that it no longer wants to give away double relief.
The firm’s VCTs have about 20 per cent invested in renewable energy and it would not be looking at further investments in the space.
He was not surprised by the announcement.
”There’ve been rumblings on it for a year or so now, it shouldn’t have surprised anyone,” he adds.
RobertsonHare partner Philip Hare says it appears HMRC had a chance of heart in the past few months.
After explicitly leaving hydro and anareobic digestion eligible for double tax breaks in March, they have now decided to scratch that decision, he says.
Meanwhile, the Government will set up a new digital process for investors and companies to make the qualifying process for investee companies much easier and more efficient. It is expected to launch in 2016.