The Government Legal Department has responded to Community Energy England’s pre-action letter about the removal of tax relief from community energy enterprises. HM Treasury concedes that it gave only five weeks’ notice of the change, and not the six months which it had promised in the Budget. Government lawyers contend that an earlier ministerial statement that it was ‘monitoring’ the schemes had in effect put community energy enterprises on notice that the policy might be changed without the agreed grace period.
The community energy sector rejects this argument, and believes that a court would too. It has decided, however, not to devote scarce resources to pursuing the matter to judicial review; but instead to help the Treasury become better informed about the benefits of bone fide community energy schemes so that it can reconsider its approach to Social Investment Tax Relief (SITR) when this is expanded in 2016.
“We are disappointed that HM Treasury refused to provide the results of its monitoring to justify its U-turn”, says CEE chairman Philip Wolfe. “It offered just one document, but only if we kept it secret. This isn’t a national security matter, so we have concluded that the evidence is too weak to be published.”
Several community energy projects did manage to beat the 30 November guillotine, and an estimated £12m of community share offers were funded in the five-week window before EIS was withdrawn on 30 November but the deadline was too tight for many other projects. “The result is that many excellent community projects will not now proceed” says Nicholas Gubbins, the Chief Executive of Community Energy Scotland, which supported the pre-action letter. “This is not only a sad waste of time and money already expended, but also a loss of millions of pounds worth of future community benefit”.
Although not well supported by the evidence it has provided, the Treasury’s response suggests that it is concerned about commercial organisations dressing themselves up as community interest companies to take advantage of SITR. “While we share this concern,” says Chris Blake the Chairman of Community Energy Wales, which also joined the action; “surely government can police this by proper drafting of legislation and regulation of the sector. As things stand, bona-fide social enterprises are becoming collateral damage in a heavy-handed move to prevent abuse by others.”
Philip Wolfe added that “the response suggests that the Treasury is not well informed about the community benefits which our members offer or the risks inherent in developing these projects. Our research shows that a sample of 80 community energy schemes are providing £25m in community benefits and engaging 11,000 people.”