Enterprise Investment Schemes and Seed Enterprise Investment Schemes allow tax breaks to attract investment into eligible companies. Previously, renewable energy projects that claim the ROC and RHI have been eligible, however, under the new budget, point 1.59, these projects will now become exempt from this tax break.
1.59 Excluding Department of Energy & Climate Change (DECC)-subsidised activities from qualifying for the venture-capital schemes – Legislation will be introduced during the passage of Finance Bill 2014 to prevent companies from benefiting from investment via the Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS) or the Venture Capital Trust (VCT) scheme when they also benefit from DECC Renewable Obligations Certificates (ROCs) or Renewable Heat Incentive (RHI) subsidies. This legislation will have effect in the case of EIS and SEIS in respect of shares issued on or after Royal Assent to Finance Bill 2014. In the case of VCTs, it will have effect in respect of investments made by a VCT on or after Royal Assent to Finance Bill 2014.
However, this does not mention projects that come under the Feed in Tariff.
Previous rules have been stipulated that only some renewable energy projects that attract the feed In tariff. are eligible. As seen in the guidance below, only Hydro and AD projects can claim this incentive, alongside renewable energy projects that are carried out by community companies:
Enterprise investment scheme guidance can be found:Those that do not are termed 'excluded activities' and are:
• generating or exporting electricity which will attract a Feed-in Tariff, unless generated by hydro power or anaerobic digestion, or unless carried on by a community interest company, a co-operative society, a community benefit society or a Northern Irish industrial and provident society
I have spoken to one very helpful chap at HMRC and then a laughably rude chap, at Small Company Enterprise Centre, Tel: 03000 58890, who suggested that the criteria for eligibaility for EIS and SEIS should stay the same for those projects eligble for the FIT, as stated in the EIS guidance.
This will be a great relief to many community renewable energy schemes who use the EIS and SEIS tax breaks as an additional enticement for their local community to invest in their project. This means that a share issue may advertise an IRR of 4%, but with this tax break the IRR can be increased to maybe 6%. This has the additional benefit of allowing more profit to be retained with in the project, for further community benefit.