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HMRC internal manual

Venture Capital Schemes Manual

Excluded activities: subsidised generation or export of electricity

ITA07/S192(1)(ka); ITA07/S303(1)(ka)

S192(1)(ka) and S303(k)(a) exclude the generation or export of electricity in respect of which any person (whether the company undertaking the generation or export or any other person) receives a feed-in tariff under a UK government scheme to encourage small-scale low-carbon generation of electricity or a financial incentive granted under a similar overseas scheme.

This exclusion has effect generally where the relevant shares are acquired on or after 6 April 2012. Where shares were issued on or after 23 March 2011 and before 6 April 2012, they will still qualify providing the subsidised generation or export began before 6 April 2012.

Several methods of production of electricity, and several types of company are specifically not excluded by the legislation. So a trade which consists to a substantial extent of generating or exporting electricity which attracts a feed-in tariff can still qualify if it involves one of those methods of productions or is undertaken by one of those types of company. The following paragraphs give more details.

ITA07/S198A; ITA07/S309A

Trades where the electricity is generated by anaerobic digestion or hydroelectric power are not excluded by the legislation.

Irrespective of the means by which electricity is produced, trades carried on by the following types of company are not excluded by the legislation:

  • community interest companies,
  • co-operative societies,
  • community benefit societies or
  • Northern Irish industrial and provident societies.

‘Anaerobic digestion’ is defined in the legislation as meaning the bacterial fermentation of organic material in the absence of free oxygen, but excluding anaerobic digestion of sewage or material in a landfill.

‘Hydroelectric power’ is not defined by the legislation, but takes it ordinary meaning of energy derived from flowing water. This can be from rivers or man-made installations.

‘Community benefit society’ and ‘co-operative society’ are defined by the legislation as companies which are either registered as such under the Co-operative and Community Benefit Societies and Credit Unions Act 1965, or which are a pre-2010 Act society as defined by section 4A(1) of that Act and which meet the conditions of section 1(3) or 1(2) respectively of that Act.

‘NI industrial and provident society’ means a society registered under the Industrial and Provident Societies Act (Northern Ireland) 1969.

‘Community interest company’ is not defined by this legislation, but is a type of company as introduced by section 26 of the Companies (Audit, Investigations and Community Enterprise) Act 2004.