Scrapping tax relief could ‘cripple’ community energy projects

Community Energy England (CCE) has warned that plans by the Treasury to scrap tax relief for community-owned energy projects could have a devastating impact.

The association warms that current proposals "would have an immediate and dramatic impact on renewable energy social enterprises, effectively crippling further expansion of the sector". CCE adds that if incentives are withdrawn a large number of projects in the pipeline will have to be abandoned.

Research commissioned by CCE reveals that community-owned renewable energy projects could provide £137 of social investment for every £100 of tax relief. CCE claims that the Enterprise Investment Scheme (EIS) and Seed EIS have been successful in attracting investment into the sector.

Kathy Smyth, policy director at CCE adds: “It is incomprehensible that the government should now be talking about withdrawing them, just a few short months after its Community Energy Strategy calls for a dramatic expansion of the sector."

CCE highlights research carried out by the Community Energy Coalition which claims that removing EIS tax relief will cut investment in community energy schemes by as much as 59%.

Robert Rabinowitz, director of CCE said: "Removal of EIS would be particularly damaging to community energy projects because of their very high dependence on equity, given an almost total lack of bank and commercial funding in the sector."

CCE calculates that a typical community energy project raises equity for 85% of their capital costs. Rabinowitz concluded: "Without EIS relief many community energy projects will find it impossible to raise such high levels of equity."