Bates, Wells and Braithwaite (“BWB”), solicitors, acting on behalf of Community Energy England (“CEE”) have served a letter on HM Treasury and its solicitors challenging the Government’s announcement on 26 October 2015, in the final stages of the Finance Bill, of:
- the removal of the Enterprise Investment Scheme (“EIS”) tax relief from community energy schemes with effect from 30 November; and,
- the reversal, without any prior warning, of the Government’s stated intention that there would be a period for community groups of 6 months once state aid approval of the enlargement of Social Investment Tax Relief had been obtained to allow certain community energy groups which provide social benefit to effect a smooth transition between the two reliefs.
The letter refers to and quotes a number of express representations regarding the proposed managed transition of the EIS by the Treasury, including one in the March 2015 Budget Statement that:
“2.77 Venture capital schemes: renewable energy – As announced at Autumn Statement 2014, companies benefiting substantially from subsidies for the generation of renewable energy will be excluded from also benefiting from EIS, SEIS and VCTs with effect from 6 April 2015, with the exception of community energy generation undertaken by qualifying organisations which will in future become eligible for the Social Investment Tax Relief (SITR). The government will allow a transition period of 6 months following state aid clearance for the expansion of SITR before eligibility for EIS, SEIS and VCT is withdrawn.”
CEE contends that these representations had created a “legitimate expectation” in law i.e. a series of clear assurances had been given by the Treasury that the Government would not remove the benefit of the EIS from community energy groups without implementing transitional provisions. It is CEE’s contention that these assurances could, as a matter of law, be relied upon by the community energy sector and that it was not open to the Treasury to simply reverse the proposals without due process.
The letter also deals with the effect of the Treasury’s reneging on the legitimate expectation created, stating that:
“As a result of the Treasury’s representations prior to the Announcement and the Decision, CEEs have been developing projects in the expectation that they would be eligible for tax relief; initially under EIS, and in due course under SITR. They also had a reasonable expectation that changes to tax relief eligibility would not be made with less than six months’ notice.”
“No rationale has been properly elaborated by way of a public and/or parliamentary statement as to why the EIS is being withdrawn without a transitional period, and, why the SITR is not intended to be expanded as previously announced”
“The implementation of the Decision would be entirely unjust as it is being proposed to be done without warning and without proper elaboration of the reasons for the Decision.”
Community Energy England has said it reserves the right to commence judicial review proceedings, including injunctive proceedings (as well as raising the possibility of damages claims being made by affected parties), unless the Government takes immediate action to reverse its unlawful decision.
Posted on 24/11/2015 in Legal UpdatesBack to Knowledge