Energy Tax Relief
In an era where energy costs continue to rise, energy-intensive industries face unique challenges. However, there’s good news – the government recognises the importance of supporting these sectors and is offering valuable tax relief incentives to allow businesses to remain competitive in the European market.
The Advantage of Tax Relief for Energy-Intensive Businesses
What is energy tax relief? Energy tax relief schemes, such as the Energy-Intensive Industries (EII) exemption scheme or the Climate Change Levy (CCL) exemption scheme, help energy-intensive industries in the UK to alleviate the financial burden associated with high energy consumption.
Why does it matter? By taking advantage of energy tax relief, your business can significantly reduce its energy tax costs. This means more capital stays within your organisation, enabling you to reinvest in innovation, employee development, or other strategic initiatives and improve your bottom line.
At Ryan, we specialise in two of these exemption schemes:
- The Energy-Intensive Industries (EII) Exemption Scheme
- The Climate Change Levy (CCL) Exemption Scheme
The Energy-Intensive Industries (EII) Exemption Scheme
The EII exemption scheme is a programme designed to support EIIs. These industries, which include sectors such as steel, plastic, glass, and paper manufacturing, play a crucial role in the economy, as they contribute to job creation and economic growth.
However, they consume a significant amount of energy in their production processes, and their high energy use can be a financial burden when compared to industries in countries with cheaper energy.
The EII scheme helps to level the playing field by providing financial relief to these industries. It works by offering an exemption of up to 100% on four non-commodity costs (CfD, RO, FiT, and CM) charged on electricity bills, as well as up to 60% exemption from network charges under the Network Charging Compensation Scheme (NCCS). Together, these exemptions can represent up to 35% of the overall electricity bill!
To qualify for the EII exemption scheme and the subsequent NCCS, companies must meet certain criteria to receive an EII certificate.
Who Is Eligible for the EII Exemption Scheme?
- A business that manufactures a product in the UK within an eligible sector that has a specific four-digit NACE code.
- A business that passes the “business-level test.”
The Climate Change Levy (CCL) Exemption Scheme
The CCL is a tax imposed on businesses and organisations in the UK to encourage the reduction of carbon emissions and promote energy efficiency. It was introduced as part of the government’s commitment to addressing climate change and encouraging sustainable practices.
The CCL exemption scheme allows qualifying businesses to apply for relief from the levy, provided their energy has been consumed in the exempt areas listed below. On average, the savings range from 4-7% of the entire energy bill, and the exemption can be backdated up to four years if you have been paying CCL during this period when you should have been exempt.
Who Is Eligible for the CCL Exemption Scheme?
A business may be eligible for up to 100% relief on the CCL charges, with exemptions available for the following:
- Businesses that conduct mineralogical or metallurgical manufacturing processes
- Businesses using supplies used in certain types of transport and in combined heat and power (CHP) plants
- Domestic use, charities, and community heating schemes
Can You Qualify for Both Schemes?
Yes, you can! Many industries qualify for both energy tax relief schemes, as shown in the diagram below.
Successful claimants of both the EII and CCL exemption schemes are eligible to receive benefits of up to a 41% discount on their electricity bills, along with an additional 6% discount on their gas bills for the last four years and future bills!
Find Out More from Our Energy Tax Relief Experts
Our dedicated energy tax relief team specialises in guiding energy-intensive businesses through the complexities of the EII exemption scheme and CCL exemption scheme.
To explore how we can support your business with understanding the intricacies of energy tax relief and your eligibility for the schemes, simply fill in the form below and one of our tax relief professionals will be in touch shortly.
FAQs
Can I be eligible for the Networking Charging Compensation Scheme without being eligible for the EII scheme?
Unfortunately, not. The criteria is the same for both – you must be eligible for the EII scheme to be eligible for the NCC Scheme.
Do I need a separate certificate to benefit from the NCC Scheme?
No. A valid EII exemption certificate will allow you to benefit from the NCC Scheme.
Will I see an immediate reduction in my electricity costs?
No. Initially, the scheme states that a retrospective payment will be made after April 2025 to refund networking charges effectively “overpaid” from April 2024. We are awaiting a legislation update to confirm how the benefit will be given from April 2025.
Is my percentage of exemption in line with my EII certificate percentage of exemption?
Yes. As the percentage of exemption under the NCC Scheme is in line with that of your EII percentage of exemption, you would receive 60% compensation of your electricity network charging costs if your EII certificate holds 100% exemption. If your EII percentage of exemption was 50%, you would receive 50% compensation on 60% of your network charging costs.
Do I need to make a separate application for the NCC Scheme and provide you with new details?
No. As the NCC Scheme follows on from our EII application process, the building, evidencing, and defending of the NCC submission will be handled by us in an efficient and streamlined manner.
Other Innovation Funding Services
Ryan’s unrivalled expertise within innovation funding and tax relief empowers companies to fuel their business growth and fund their future. Our specialist team will evaluate your business’s eligibility for a diverse range of innovation funding services, including grants, research and development (R&D) tax relief, capital allowances, the Patent Box, and land remediation relief.