The government has published draft legislation to change the definition of mineralogical processes used to determine which businesses can claim exemption from the climate change levy, to ensure that this exemption remains operable following the UK’s departure from the EU
The government has published draft legislation to change the definition of mineralogical processes used to determine which businesses can claim exemption from the climate change levy, to ensure that this exemption remains operable following the UK’s departure from the EU.
The exemption from climate change levy for the energy used in mineralogical and metallurgical processes was introduced on 1 April 2014 to help to reduce costs of businesses in these sectors, which are some of the most energy intensive as well as being subject to high levels of international competition.
Currently, mineralogical processes are defined by reference to the EU’s energy taxation directive. The draft redefines these processes by reference to NACE codes (an internationally recognised system for classifying economic activity). This aligns the definition with the way metallurgical processes are defined.
In addition, at the moment the exemption for both processes refers to energy (in practice mainly gas and electricity) being supplied ‘to a person’ and used ‘by a person’. HMRC says this has the unintended consequence of excluding tenanted businesses that carry out mineralogical and metallurgical processes from claiming the exemption because they receive their energy via a landlord rather than directly from an energy utility. In these circumstances, the tenant will receive the supply of energy via the landlord who is not the qualifying person.
By deleting the words ‘to a person’ and ‘by a person’ the draft definition, which included in Finance Bill 2018-19, clarifies that the landlord is entitled to claim the exemption on behalf of a tenant.
The measure will come into effect following Royal assent to Finance Bill 2018-19.
It does not change the scope of the climate change levy exemption in any way, nor does it have an economic impact. However, HMRC says there will be an ongoing savings to affected businesses who are tenants since the measure clarifies that they are entitled to benefit from the exemption. There will also be an ongoing savings for affected landlords, who will no longer have to become directed utilities in order to claim the exemption on behalf of any tenants.
Report by Pat Sweet
