The Climate Change Levy (CCL) applies to energy supplied to certain end users.
Exemptions from the main rates of CCL are available, and since the introduction of CCL in 2001, electricity generated from renewable sources has been exempt under Paragraph 19, Schedule 6, Finance Act 2000.
From 1 August 2015, the government will remove the CCL exemption for Renewably Sourced Electricity (RSE).
There will be a transitional period for suppliers, from 1 August 2015, to claim the CCL exemption on any RSE that was generated before that date.
The government proposal is that, where an electricity utility has a credit balance at 1 August 2015, it will be able to continue to make CCL exempt supplies until the transitional arrangements end or their credit balance is used up, whichever is sooner. Where it has a debit balance at 1 August 2015, the utility will either have to acquire RSE generated before that date in order to continue to make exempt supplies in respect of its renewable source contracts, or it will have to make payment to HMRC.
The government will discuss the details of this transitional period with stakeholders over the summer and autumn, to determine an appropriate length for it.
Suppliers of RSE should consider how they will be affected by having to apply CCL to supplies of RSE generated after 1 August 2015, and how they might utilise the transitional period.