Investing in green energy
16 November 2009
Electricity suppliers are now obliged to show that a certain proportion of the electricity they supply comes from renewable sources. One of the ways of doing this is through the submission of Renewable Obligation Certificates (ROCs) to the energy regulator. ROCs are obtained by energy suppliers either generating renewable energy themselves or by purchasing it from others.
The market in ROCs provides a real financial incentive for farming businesses to generate green electricity, for example through investment in anaerobic digestion technologies. The opportunity to structure such investment through a company that qualifies for relief under the enterprise investment scheme (EIS) adds tax efficiency to this incentive.
The EIS involves four reliefs:
- income tax relief on investments in EIS qualifying shares
- capital gains tax deferral relief on gains re-invested in qualifying EIS shares
- a complete exemption on capital gains made on EIS investments held for at least 3 years
- loss relief against either income or capital gains in the event the EIS shares are sold at a loss.
The third of these reliefs is often the most valuable.
EIS can be notoriously complex, however in the right circumstances it offers come very valuable tax reliefs for those investing in renewable technologies.
If you would like further information please contact John Barnett by e-mail or by telephone on +44(0) 117 902 2753.