Budget – Renewables Obligation Certificates

by | Mar 20, 2014

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 Ian Lowes, Managing Director at Lowes Financial Management, comments on yesterday's on the VCT changes in the Budget – and specifically the unexpected change related to Renewables Obligation Certificates

 "While most changes about VCTs have been mentioned in previous reports, the unexpected change announced in the Budget was the government’s plan to exclude companies, including VCTs, EIS and SEIS schemes, that make use of Renewables Obligation Certificates (ROCs). Quite a few of the renewable VCTs make use of ROCs, as an income stream in conjunction with the general sale of electricity. Going forward, the launch of renewable VCTs will be difficult given the very narrow range of renewable investments that will remain eligible. 

The change is a common sense move that will help to further remove anomalies, which when exploited serve to give already tax incentivised solutions additional benefits.  This follows the changes introduced in the 2013 Autumn statement,which closed the previously exploited, dubious practice where an investor sells his VCT shares at the end of the tax reclaim period and immediately uses the proceeds to subscribe for another, identical shareholding gaining further tax relief.  Both of these serve to show the government’s commitment to these schemes, but sensibly send a message that any clever exploitation of the rules to extend the benefits beyond those intended will not be tolerated.


Today’s change is not a complete surprise given what we saw a couple of years ago when the government U-turned over its planned policy to reform feed-in tariffs for renewable energy companies. The Department of Energy and Climate Change (DECC)  scrapped plans to phase in the introduction of new rules to cut feed-in tarriff payments to mid-size renewable energy schemes by 70%. As a result, we saw particular VCTs pull their offers. For example, Matrix Clean Energy suspended its venture capital trust (VCT) offer after the review was announced."


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