UK: Budget 2011 Clean Energy Summary

Last Updated: 28 March 2011
Article by Michelle T. Davies

Budget 2011 Summary

In the Chancellor's 2011 Budget published on 23 March 2011, it was stated that the Government is committed to being the greenest Government ever and sees support for the low carbon economy as central to providing a platform for strong, long term sustainable growth. It is one of the aims of Budget 2011 to increase the proportion of tax revenue accounted for by environmental taxes.

As such, Budget 2011 announces:

Enhanced capital allowances scheme for energy-saving technologies

The energy-saving enhanced capital allowance scheme will, subject to State aid approval, be updated during summer 2011. The main change includes the addition of a new technology-efficient hand dryer.

Capital allowances on Feed in Tariff (FIT)

HMRC have acknowledged that there is some uncertainty over the rate at which capital allowances may be claimed. It is, therefore, proposed to introduce legislation to clarify the availability of capital allowances and the rate of capital allowances for expenditure on plant and machinery covered by the FITs and Renewable Heat Incentive schemes to ensure certainty over treatment. There will be consultations on this measure and the consultation document is expected to be published in May 2011 with a view to introducing legislation in the Finance Bill 2012.

Carbon price floor

The Government confirmed a carbon price floor that will come into effect on 1 April 2013. The carbon price floor will tax fossil fuels used in electricity generation under the climate change levy and fuel duty. The floor price will begin at £16 per tonne in 2013 and rise to £30 a tonne by 2020.

EIS / VCT Schemes

Measures affecting solar companies only:

Currently HMRC accept that a company whose main business is the receipt of FIT payments is a "qualifying company" for the purposes of these reliefs. However, it has been announced that legislation will be introduced in the Finance Bill 2012 to state that companies whose trade consists wholly or mainly in the receipt of FIT payments (or similar subsidiaries) will only be eligible for these schemes if the commercial electricity generation has begun before 6 April 2012. Shares issued pre 23 March 2011 will not be affected by these changes.

Where new investors wish to claim EIS / VCT relief on their share subscriptions into solar companies those companies must have started generating electricity pre-6 April 2012. It is not yet clear whether a company which starts generating electricity pre-6 April 2012 will be affected if it starts generating electricity on new sites post 6 April 2012.

General changes to be introduced from 6 April 2012

In addition to the above a number of the tests to meet for EIS / VCT relief will be amended in the Finance Bill 2012 (including the size of the company pre-investment; the annual amount that may be invested through EIS / VCT; and the amount an individual may invest through the EIS scheme).

Changes to be made from 6 April 2011

The rate of income tax relief on investments made from 6 April 2011 will increase from 20% to 30%.

Climate change levy rates

Legislation will be introduced to increase the rates of climate change levy in line with the retail prices index from 1 April 2012.

Climate change levy exemption: certain forms of transport

The climate change levy exemption for taxable commodities used in rail freight will be suspended from 1 April 2011 pending EU State aid re-approval. The exemption will be re-instated upon receipt of the further approval, with retrospective effect if the approval allows.

Climate change levy exemption: recycling processes

The exemption from the climate change levy for taxable commodities used in certain processes relating to the recycling of steel and aluminium is an approved State aid. The current approval expires on 31 March 2011 and the UK Government is seeking re-approval but cannot legally continue with the exemption beyond 1 April without European Commission approval.

Green Investment Bank

The government's flagship Green Investment Bank ("GIB") will launch in 2012, a year earlier than expected but GIB will not be able to borrow additional funds until 2015/16. The bank will be backed by £1bn of government funding and an additional £2bn raised from asset sales. This initial capitalisation will allow the bank to leverage an extra £15bn of private sector investment over the course of the parliament. It was confirmed that the bank would not be allowed to borrow until 2015/16 and, even then, only if the government's debt targets are met.

Company Car Tax rate 2013-14

The appropriate percentages will be reduced by 1% for all vehicles with carbon emissions between 95g and 220g from April 2013. Zero emissions cars will remain at 0% and ultra low emissions cars with emissions up to 75g will remain at 5%.

Fuel duty rates

  •  the main fuel duty rate will be reduced by 1 penny per litre (ppl) from 6pm on 23 March 2011
  • the 1 April 2011 increase will be deferred and implemented on 1 January 2012 when the main fuel duty rate will increase by 3.02 ppl
  • on 1 January 2012 the effective rate of duty for non-road fuels will rise in proportion to the main fuel duty rate; the duty increases on natural gas will maintain the differential with the main road fuels, and the differential for road fuel gas other than natural gas will be reduced by the equivalent of 1 ppl of petrol and
  • on 1 January 2012 the duty rate for leaded petrol will increase by the same monetary amount as main fuel duty, and the duty rate for aviation gasoline will rise in proportion to the main fuel duty rate.

The duty differential for biodiesel produced from used cooking oil will end as intended on 31 March 2012.

Landfill tax

The standard rate of landfill tax will be increased by £8 per tonne for disposals made, or treated as made, to landfill on or after 1 April 2012, increasing the rate to £64 per tonne.


The 2011 Budget included a section on planning reform. This included:

  • 21 new enterprise zones to be created with tax breaks, simplified planning and discounted business rates
  • a presumption in favour of sustainable development in the planning system
  • fast tracking of major infrastructure schemes

New Changes Subject to Consultation

Capital allowances: feed-in tariffs and renewable heat incentives

The renewable heat incentive (RHI) scheme is due to be introduced in summer 2011 and will sit alongside the FITs regime to incentivise heat generation from renewable sources. Where the electricity and heat generation is undertaken by a business, the business may also be able to claim capital allowances in respect of expenditure on the generating equipment.

Reform of climate change agreements

The scheme will be extended to 2023 and the current 54 participating sectors will continue to be eligible for the scheme. From 1 April 2011, CCA facilities will pay a reduced rate of CCL of 35 per cent on all taxable commodities. For electricity supplies only, this reduced rate of CCL will be amended from 35 per cent to 20 per cent from 1 April 2013.

Aviation tax consultation

A consultation with proposals for reform of Air Passenger Duty from April 2012 was published. The Government has also announced its intention to tax business jets.

For further information or advice, please contact:

Michelle Thomas
Tel: 0845 498 7553

Deneze Hastings
Tel: 0845 497 8223

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.