Solar VCT groups in uproar over proposed government U-turn

Investors criticise the government’s decision to reverse ‘extension rule’ on tax relief.

Thousands of investors in solar VCTs that buy into large-scale renewable energy products could lose millions after the government announced it is reviewing recent legislative changes.

The government’s Department of Energy and Climate Change (DECC) is proposing to axe the ‘extension rule’ that gave VCT providers an extra 12 months to benefit from big tax breaks, in a major U-turn to April’s budget proposals.

In April the government announced new larger-scale renewable energy sites that are between 0.5 and five megawatts, will have their feed-in-tariff payments cut by 70%.

However, while the government gave VCT providers until 1 August to complete investments on new sites, it also allowed them to apply for an ‘extension rule’, giving companies a further 12 months to build on existing sites and still receive tax relief.

The extension rule is now under threat, with VCT providers warning the policy reversal could cost investors £100m.

Solar VCT provider Hazel Capital has written an open letter to MPs urging the government to stick to its guns to ensure investors are not hit hard in the pocket.

The group’s CEO Ben Guest said: “We want the government to stick to its word and desist from any action regarding the removal of the extension rule without first correctly representing facts to all MPs.”

“It is our belief that removing this rule retrospectively will mean thousands of small UK investors seeking long-term growth of their personal savings will lose a collective £100m invested in UK renewable energy infrastructure, mainly in solar, and we question the legality of such a move by DECC.”

He added the government has ignored the enormous growth potential of solar energy, warning the such a move will see the UK fall further behind its European counterparts.

“The proposal will undermine the UK as a region for renewable energy investment on a national and international scale and widen the gulf between the UK and the rest of Europe regarding the development of a sustainable and significant renewable energy infrastructure,” said Guest.

Octopus’ managing director Paul Latham also criticised the government’s plans, but added its own investors will not lose out as it completed its sites before the August deadline.

“The government changing its mind over the legislation has been hugely unhelpful for the industry and it should be clearer over whether the proposals will actually be set in stone,” said Latham.

“We made sure our sites were finished but a lot of providers did not as they anticipated they would be able to use the loophole of the extension rule.”