Social Investment Tax Relief (SITR)
At Report stage and Third Reading of the Finance Bill, the Financial Secretary announced the exclusion of companies whose activities involve making available reserve electricity generating capacity and community schemes benefitting from subsidies for the generation of energy, from the Enterprise Investment Scheme, Seed Enterprise Investment Scheme and Venture Capital Trust schemes. These are the most recent in a series of exclusions from the venture capital schemes of subsidised energy generation schemes.
The Financial Secretary also announced that community schemes benefitting from subsidies for the generation of energy will not be eligible for SITR when SITR is enlarged. Schemes benefitting from support under the Feed-in tariff are already excluded from SITR. This will mean that community energy organisations which benefit from subsidies for the generation of renewable energy will no longer be eligible for any tax-advantaged investment for investment made on or after 30th November 2015.
Report stage and Third Reading of the Finance Bill amendments and new clauses covered:
§ older companies receiving their first risk finance investment under the 50% turnover test;
§ the provision of information and share exchanges;
§ funding limits in relation to subsidiaries;
§ powers to amend the EIS and VCT rules;
§ liquidity management for VCTs;
§ other minor technical changes; and,
§ the exclusion of companies from the EIS, SEIS and VCT schemes if their activities involve making available reserve electricity generating capacity
The date of Royal Assent is the prerogative of Parliament. Royal Assent historically happens around a month after the last session of Public Bill Committee, which took place on 15th October.
In addition, the Financial Secretary to the Treasury announced that the government would extend the exclusion of subsidised energy generation to community energy organisations through regulations. This follows the announcement in July that the government would continue to monitor the use of SEIS, EIS and VCT for investments in community energy organisations benefiting from subsidies for the generation of renewable energy to ensure this support delivers value for money for the taxpayer, and is not subject to misuse.
The changes to the excluded activities list for SEIS, EIS and VCT schemes will take effect for investments made on or after 30th November.
The government intends to apply both the exclusion for activities to make available reserve electricity generating capacity, and the exclusion for subsidised renewable energy generation to the Social Investment Tax Relief (SITR) when SITR is enlarged.
The Report stage debate can be found here (http://www.publications.parliament.uk/pa/cm201516/cmhansrd/cm151026/debtext/151026-0002.htm#15102612000001) and the legislation and explanatory notes here (http://services.parliament.uk/bills/2015-16/finance/documents.html).
In response to a significant increase in the use of the schemes to fund energy generation, the government has decided to introduce an amendment to exclude activities that involve the provision of reserve power capacity and generation, for example under a Capacity Market agreement or Short Term Operating Reserve contract. As these activities are asset-backed and benefit from a guaranteed income stream, mainstream financing is typically already available which removes the need for tax-advantaged investment. This change will apply to investments made on or after 30th November 2015.
As announced by the Financial Secretary to the Treasury, David Gauke MP, at Public Bill Committee, the government intends to introduce increased flexibility for replacement capital. It is the government’s intention that this change will be introduced in due course through secondary legislation, subject to State aid approval. To this end, amendments 14 and 40 include powers to amend the EIS and VCT rules by regulations under the draft affirmative procedure.