Community Energy England and its counterparts in Wales and Scotland have begun legal action against HM Treasury over the decision to make community energy projects exempt from tax relief schemes.

The highly controversial decision to remove community energy’s eligibility for EIS, SEIS and SITR schemes was announced last month and is set to come into force on 30 November.

However Community Energy England has now questioned the legality of the move given a promise made by chancellor George Osborne during March 2015’s budget statement, during which he said a six-month notice period would be given on changes to tax relief allowing for a transition to the SITR system.

The Treasury has claimed that the removal of tax relief incentives has been made in order to stamp out abuse of the schemes but has yet to provide any detailed response to questioning, nor an impact assessment made prior to the decision.

The challenge comes in the form of a ‘letter before action’ which forms the first part of pre-action protocol for a judicial review, which would pour public scrutiny over the decision.

Speaking to Solar Power Portal this morning Philip Wolfe, chairman at Community Energy England, said the action had been started because its members stand to be “hugely disadvantaged” by the sudden changes to the tax regime.

“It’s vital that there is regulatory certainty in the entire energy sector. If you find that government won’t stick to policy measures that it’s previously announced, then it’s going to be hard to get any investment in the sector at all because most investment is dependent on people having an understanding on what the policy and regulatory framework is,” Wolfe said.

The Treasury now has 14 days in which to reply or face possible sanctions however Wolfe said he expected a “prompt reply” from HMT. It’s hoped that a response would be forthcoming before the 30 November cut-off point for the schemes.

HM Treasury has yet to respond to requests for comment at the time of writing, but did confirm that a response would be forthcoming.