EGL21000 - How liability is computed: the benchmark amount

The EGL is charged on the difference between the receipts that result from the prices actually obtained for electricity output and those that would have arisen had the price been the “benchmark amount”.  This amount is also relevant when calculating any exceptional costs allowable for EGL purposes.

The benchmark amount is based on the prices in the UK wholesale electricity market that were being obtained before the energy crisis that began in 2022.

The benchmark amount was set at £75 per Megawatt hour (MWh) from the commencement of the EGL on 1 January 2023 and F(2)A23/S281(2) provides that the amount will be adjusted in line with inflation for each financial year starting from 1 April 2024, as explained below.

Where a generating undertaking’s qualifying period straddles a financial year then it will be necessary to allocate generation to the years involved and this is to be done on a fair and reasonable basis.

The indexation is based on the annual change in the Consumer Prices Index (CPI) in the period to the previous December.  The Office for National Statistics publishes the CPI each month together with a headline figure for the annual increase.  F(2)A/S281(2) applies the percentage change in the CPI itself rather than the headline figure.

F(2)A23/S281(3) requires HMRC to publish the updated benchmark amount before the commencement of the relevant year.  That will be done by setting out the amount for each financial year in an update to this manual page. The figure will also be shown in the “Overview of tax legislation and rates” (OOTLAR) when published at a fiscal event.

Changes to the Benchmark Amount

1 April 2024 to 31 March 2025

The benchmark amount for the period from 1 April 2024 to 31 March 2025 (financial year 2025) is £77.94.

The CPI  for December 2023 was 132.2 and that for the previous December was 127.2. This means that from 1 April 2024 to 31 March 2025 the benchmark amount becomes £75 x (132.2 / 127.2) which rounded up to the nearest whole penny gives the figure of £77.94 above.