Section 18: Climate Change Levy: Reduced-Rate Supplies
Summary
1.Section 18 amends the reduced rate of climate change levy (CCL) payable by businesses participating in the climate change agreement (CCA) scheme from 20 to 35 per cent of the ordinary rates with effect from 1 April 2011. This section is linked with section 67.
Details of the Section
2.Subsection (1) provides for paragraph 42 of Schedule 6 to the Finance Act 2000 (amount payable by way of climate change levy) to be amended by replacing “20 per cent” in sub-paragraph (1)(c) with “35 per cent.”
3.Subsection (2) provides for the change to have effect in relation to supplies treated as taking place on 1 April 2011 or later.
Background Note
4.CCL was introduced in 2001 and is a UK wide tax on the supply of electricity, gas, solid fuel and liquefied gases used for fuel purposes by business and the public sector.
5.The purpose of the CCL is to encourage the efficient use of energy and the use of renewable energy, in order to help meet the UK’s international and domestic targets for cutting emissions of greenhouse gases.
6.CCAs were introduced alongside the levy in recognition of its impact on the competitiveness of energy-intensive sectors of industry. They are voluntary agreements made between the Department of Energy and Climate Change and sector associations and their members. The agreements entitle participating facilities to pay a reduced rate of levy in return for meeting challenging targets for improving energy efficiency or reducing emissions.
7.The reduced rate of CCL, which is claimed by facilities in the CCA scheme, is a State aid. The State aid approval expires on 31 March 2011. The CCL on reduced-rated supplies of gas and solid fuel is currently below the minimum levels set by European Union (EU) Directive 2003/96/EC. Amending the reduced rate from 20 to 35 per cent will ensure that the levy paid on reduced-rated supplies of all taxable commodities will be above the applicable EU minima. This will entitle the UK to use the simplified procedure for State aid clearance provided for by Commission Regulation (EC) No 800/2008 and provide participating facilities with certainty that the reduced rate will continue beyond 31 March 2011. Article 3(1) of that Regulation requires the aid scheme to contain an express reference to the Regulation in the legislation and that reference is contained in section 67 of the Bill.
