Finance Act 2012

• Permanent Page URL

Emissions allowances.

44.— (1) The Principal Act is amended—

(a) by inserting the following after section 81B:

“Emissions allowances.

81C.— (1) In this section—

‘Directive’ has the same meaning as in section 540A;

‘emissions allowance’ means—

(a) an allowance within the meaning of Article 3 of the Directive,

(b) an emission reduction unit or ERU, within the meaning of Article 3 of the Directive, or

(c) a certified emission reduction or CER, within the meaning of Article 3 of the Directive;

‘profit and loss account’, in relation to an accounting period of a company, has the meaning assigned to it by generally accepted accounting practice and includes an income and expenditure account where a company prepares accounts in accordance with international accounting standards.

(2) Notwithstanding anything in section 81, any amount, computed in accordance with generally accepted accounting practice, charged to the profit and loss account of a company, for the period of account which is the same as the accounting period, in respect of expenditure, for the purposes of a trade carried on by the company, on the purchase of an emissions allowance shall be allowed to be deducted as expenses in computing the amount of the profits or gains of the company to be charged to tax under Case I of Schedule D for the accounting period.

(3) Subject to section 540A, where a company disposes of an emissions allowance which it purchased for the purposes of a trade carried on by it, the consideration for such disposal shall be treated as a trading receipt of the trade.”,

and

(b) by inserting the following after section 540:

“Disposal of certain emissions allowances.

540A.— (1) In this section—

‘Agency’ means the Environmental Protection Agency, being a competent authority designated under Article 18 of the Directive;

‘aircraft operator’ has the same meaning as in Article 3 of the Directive;

‘Directive’ means Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 ² (as amended by Directive 2004/101/EC of the European Parliament and of the Council of 27 October 2004 ³ , Directive 2008/101/EC of the European Parliament and of the Council of 19 November 2008 ⁴ and Directive 2009/29/EC of the European Parliament and of the Council of 23 April 2009 ⁵ );

‘emissions allowance’ means an allowance within the meaning of Article 3 of the Directive;

‘installation’ and ‘operator’ have the same meanings respectively as in Article 3 of the Directive;

‘permit’ means a greenhouse gas emissions permit within the meaning of Article 3 of the Directive;

‘relevant person’ means—

(a) a person to whom a permit has been issued in accordance with Articles 5 and 6 of the Directive in respect of an installation in relation to which the person is an operator, or

(b) an aircraft operator;

‘relevant scheme’ means—

(a) a scheme of reconstruction or amalgamation in relation to which section 615 applies,

(b) a transfer of an asset in relation to which section 617 applies, or

(c) a transfer of a trade, or part of a trade, in relation to which section 631 applies.

(2) (a) Subject to paragraphs (b), (c) and (d) and notwithstanding section 110 or any other provision of the Tax Acts, where—

(i) a relevant person sells, transfers or otherwise disposes of an emissions allowance (in this section referred to as a ‘relevant emissions allowance’) received or receivable free of charge by that person from the Agency in accordance with the Directive, or

(ii) a company sells, transfers or otherwise disposes of a relevant emissions allowance which the company acquired under, or as part of, a relevant scheme,

such a sale, transfer or disposal shall constitute the disposal of an asset for the purposes of the Capital Gains Tax Acts and be treated as not being a disposal of trading stock for such purposes.

(b) References in paragraph (a) to the sale, transfer or disposal of a relevant emissions allowance shall include references to the sale, transfer or disposal of any interest or rights in or over such an allowance.

(c) Paragraph (a) shall not apply to a surrender and cancellation of an emissions allowance in accordance with Article 12 of the Directive.

(d) Paragraph (a)(ii) shall not apply to any sale, transfer or disposal of a relevant emissions allowance where, at any time before that event, the relevant emissions allowance was transferred from one company to another company in circumstances where the transfer was not made under, or as part of, a relevant scheme.

(3) For the purposes of the computation under this Part of any gain accruing to a relevant person or a company, as the case may be, on a disposal referred to in subsection (2)—

(a) no sum shall, notwithstanding section 547 or 552, be allowed as a deduction from the consideration for the disposal apart from incidental costs to the person or company making the disposal, and

(b) emissions allowances other than relevant emissions allowances shall be deemed to have been disposed of before relevant emissions allowances are disposed of by the person or company.

(4) Section 596 shall not apply where a relevant emissions allowance acquired by a person is appropriated as trading stock of the trade carried on by the person.”.

(2) Subsection (1)(b) applies to disposals, referred to in section 540A (inserted by subsection (1)(b)) of the Principal Act, made on or after 8 February 2012.

² OJ No. L275, 25.10.2003, p.32

³ OJ No. L338, 13.11.2004, p.18

⁴ OJ No. L8, 13.1.2009, p.3

⁵ OJ No. L140, 5.6.2009, p.63