Isra-Mart srl:Budget 2011 – Loss of investment tax relief "another kick in the nuts" for solar

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The government's decision to exclude solar and wind energy projects from tax relief investment schemes so soon after proposing cuts to subsidies for solar installations constitutes a "systematic attack" on the renewables sector, industry experts have today argued.

As part of yesterday's Budget, the chancellor George Osborne announced previously eligible solar and wind projects will now be excluded from the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) from April 2012, removing a potentially vital revenue stream.

The EIS offers investors tax relief if they provide investment to certain qualifying industries, promising instant returns and lower levels of risk.

The scheme works alongside Venture Capital Trusts (VCTs), investment companies that enjoy special status in return for putting 70 per cent of their assets into firms that would qualify for the EIS.

The Treasury told BusinessGreen the EIS and VCTs were intended to help small startups and that the feed-in tariffs renewable energy incentive scheme already receive eliminates the risk investors previously faced, making such projects ineligible for the tax breaks.

James Vaccaro, managing director of Triodos bank's renewables division, said the move was not surprising but potentially spelled disaster for community-sized projects.

"Anything over 50kW [solar capacity] – unless it's on the books now – is dead or will die," he told BusinessGreen. "We would have done large-scale solar and now we're not going to do it. The investors would have been 4,000 individuals who don't have solar compliant roofs and it would have attracted a lower level of subsidy [for the Treasury] than if they all did it as individuals."

Katie Moore, who runs The Solar Club, a community whose members are planning to invest in a solar project, said removing solar from the scheme was "a kick in the teeth" for the group.

"We're still waiting to hear from our investors on whether or not they will put money in," she said. "This means instead of a 8.5 per cent return it goes down to four per cent. You can make almost as much through an ISA. This is going to affect many schemes."

Howard Johns, chief executive of the Solar Trade Association (STA), said that along with the proposed cuts to feed-in tariffs, it seemed like the government had launched a "systematic attack" on the solar industry.

"This is a really bad move. If you're less exposed, you're more likely to invest," he added. "It's kicking all the community schemes in the nuts yet again."