HM Revenue and Customs Brief 06/11
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Issued 2nd Febuary 2011 HMRC
Climate Change Levy (CCL): introduction of a lower rate of
CCL for supplies of natural gas in Northern Ireland
CCL legislation will be amended from 1 April 2011 to reflect a
change in treatment for the purpose of the levy for supplies of natural
gas in Northern Ireland.
The purpose of this brief is to announce the introduction of a
lower rate of CCL on supplies of natural gas in Northern Ireland from 1
April 2011; and to announce that the draft legislation amending the
appropriate paragraphs of Schedule 6 to the Finance Act 2000 is being
exposed. It also provides an explanation of the change.
Who needs to read this?
- Suppliers of natural gas in Northern Ireland that are
currently registered, or as a result of the change will become required
to register, with HM Revenue & Customs (HMRC) for the CCL. Such
suppliers are responsible, or will become responsible, for accounting
for the levy to HMRC.
- Business and public sector consumers of gas in Northern
Ireland who will have to pay the levy on their energy bills.
Domestic consumers of gas do not pay CCL and are not affected
by the change.
The key changes are outlined below. The draft legislation;
Explanatory Note and Tax Information and Impact Note are available on
Treasury website (PDF 202K) (Opens new window).
The current full exemption from CCL for supplies of natural
gas in Northern Ireland was introduced to encourage a switch to gas
from more polluting energy sources such as coal and oil, and to support
the expansion of the fledgling gas distribution network in Northern
The exemption is a state aid (approved under the Community
guidelines on state aid for environmental protection) with an approval
that is due to expire on 31 March 2011.
Why is the exemption being replaced with a lower rate of CCL?
The exemption is permitted by derogation from Directive
2003/96, which sets a framework for the way in which all EU Member
States tax energy products. The derogation from the Directive expires
on 31 October 2013.
The derogation makes it clear that total or partial exemptions
or reductions for natural gas were intended to be temporary. 31 months
is the maximum period for which the UK is able to secure further state
aid clearance for a relief from levy in Northern Ireland after the
current state aid approval expires on 31 March 2011. Following
consultation with the Commission, the Government has concluded that it
is unlikely that a full exemption would be re-approved under the
current Community guidelines on State Aid for Environmental Protection
issued in 2008, which differ significantly from the guidelines under
which this exemption has previously been approved.
The Government has therefore decided not to seek a further
period of state aid approval for the exemption. However, in recognition
of the environmental, economic and social benefits that a gas supply
infrastructure brings to Northern Ireland, it therefore plans to
introduce a lower rate of CCL on supplies of gas in Northern Ireland.
Although a lower rate of tax is still a state aid, provided it is set
at least at the minimum rate for gas prescribed by Directive 2003/96,
the UK is permitted to use a simplified clearance process for the state
How much will the lower rate be?
This lower rate of CCL will be set at £0.00059 per kilowatt
hour, which is 65 per cent lower than the full rate of CCL on gas.
The change in treatment will have effect in relation to
supplies of gas made or treated as being made on or after 1 April 2011
but before 1 November 2013. Supplies made or treated as being made on
or after 1 November 2013 will be subject to the full rate of CCL on gas.
Can any other CCL reliefs apply to supplies of natural gas in
Yes. CCL exempt supplies include gas used for electricity
production, or gas used as input fuel to a combined heat and power
station (CHP) for example.
However, businesses in Northern Ireland in the Climate Change
Agreement (CCA) scheme will not be able to claim the CCA discount on
their gas supplies between 1 April 2011 and 31 October 2013. This is
because claiming a discount on gas under both the CCA scheme and the
new lower rate would mean the business would be paying less than the
minimum rate of tax on gas set out in Directive 2003/96, invalidating
the UK's state aid clearance for both relief schemes.
Details of the current CCL reliefs, and how they are claimed,
can be found in Notice
CCL 1/3 Reliefs and special treatments for taxable supplies available.
Alternatively, you can contact the Excise and Customs Helpline.
Further information can be obtained by contacting the Excise
and Customs Helpline on Tel 0845 010 9000.
About the Author
© Crown Copyright 2011.
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Article Published/Sorted/Amended on Scopulus 2011-02-08 13:40:52 in Tax Articles