Headaches for renewables funds as Osborne cuts VCT tax breaks

Renewable energy companies will no longer be able to give investors relief under venture capital scheme rules, George Osborne announced in last week’s Autumn Statement.

The change will apply to renewable energy companies already ‘substantially benefiting’ from other government support. This could mean companies already recieving subsidies will no longer benefit from tax breaks as well.

“In order to better target the tax reliefs, the government will exclude all companies substantially benefiting from other government support for the generation of renewable energy from also benefiting from tax-advantaged venture capital schemes,” Osborne said.

The exception to this rule will be community energy generation undertaken by qualifying organisations – which could for example refer to local council schemes which encourage residents to take up solar energy.

Renewables regime
Venture capital structures have been hugely popular among renewable energy funds, which alongside giving investors tax relief for investing in the fund, were also able to claim relief for each mega-watt of energy generated under the Feed-in Tariff. Other relief was available under the Renewables Obligations Certificates and Renewable Heat Incentives schemes.

The last several years have been a confusing time for venture capital investors as government rules surrounding relief have changed several times. In the Budget earlier this year, Osborne enhanced relief for seed enterprise investment schemes (SEIS) while cutting venture capital relief for lower risk renewables, which includes solar and wind power.

Today’s news means more complexity for the sector, and has not been greeted warmly by specialists. Chas Roy-Chowdhury, head of tax at ACCA, said the change would cause headaches for both investors and companies.

“There has been a lot of changes around renewables, and what we need is stability rather than being in the scheme one minute and out of it another,” said Chas Roy-Chowdhury, head of tax at ACCA.

“Many of these businesses are very small and the last thing they need is bureaucracy.”