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  • Carbon price floor

Carbon price floor

The carbon price floor (CPF) is a tax on fossil fuels used to generate electricity.  It came into effect on 1 April 2013. It changes the existing Climate Change Levy (CCL) regime, by applying carbon price support (CPS) rates of CCL to gas, solid fuels and liquefied petroleum gas (LPG) used in electricity generation.

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Budget 2014 announcements

Budget 2014 announced reform of the CPF. There are two elements to the reform.

a) Carbon price support rates from 2016 to 2017

The CPS rate per tonne of carbon dioxide (tCO2) - the UK only element of the CPF - will be capped at a maximum of £18 from 2016 to 2017 until 2019 to 2020. This will effectively freeze the CPS rates for each of the individual taxable commodities across this period at around 2015 to 2016 levels.

Further details, including the confirmed CPS rates for 2016 to 2017 and indicative rates for 2017 to 2018 and 2018 to 2019, can be found in Tax Information and Impact Note (TIIN) Carbon price floor: reform and other technical amendments published on Budget day 2014(Opens new window).

b) CPF exemption for fuels used in combined heat and power plants (CHPs) to generate good quality electricity that is used onsite

With effect from 1 April 2015 the government will introduce an exemption from the CPF for fossil fuels that are used in CHPs to generate good quality electricity that is used onsite. It will seek views from the CHP sector and other stakeholders after the Budget and draft legislation will be published around the time of Autumn Statement 2014.

Registering for CCL if you are liable to pay the CPS rates of CCL

If you are a generator liable to pay the CPS rates of CCL you must register with HM Revenue & Customs (HMRC). From 1 April 2013, you must account for, declare and pay the CPS rates of CCL due to HMRC using the existing CCL returns procedures.

If you are already registered for CCL, you don't need to register again, but you will need to remember to account for the CPS rates of CCL on your CCL returns from 1 April 2013.

If you are registered under the Combined Heat and Power Quality Assurance (CHPQA) Programme with a generating capacity over 2MW and you use gas, solid fuels or LPG to generate electricity, you will need to register and pay the CPS rates of CCL. The person liable to register will be either:

  • the owner of a generating station, with the exception of combined heat and power (CHP) stations
  • the operator in the case of a CHP generating station

When to register

You need to register with HMRC within 30 days of the date you either make, or intend to make your first deemed taxable supply. For more information about CPS and the requirement to be registered you can read Notice CCL1/6 A Guide to the Carbon Price Floor.

Notice CCL1/6 A Guide to the Carbon Price Floor (PDF 71K)

Find out more about Registering for CCL and use form CCL1 to register by following the links below.

Notice CCL 1/1: Registering for Climate Change Levy

Registration Form CCL1

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If you are an electricity generator using oils

As oil is not subject to CCL, the carbon price floor for oils is achieved through reform of the fuel duty regimes, and in particular changes to the relief on oil used in electricity generation. From 1 April 2013, the amount of fuel duty that you can reclaim on oil used in electricity generation will be adjusted to establish new CPS rates of fuel duty on the following oils:

  • fuel oil
  • other heavy oil
  • rebated light oil
  • gas oil
  • rebated bioblend
  • kerosene*

The CPS rates of fuel duty apply in relation to any claim for relief on oil used to generate electricity on or after 1 April 2013*, irrespective of when that oil was supplied to the generator.

*Kerosene will be subject to CPS rates of fuel duty from 1 May 2014

Form EX55 has been amended to account for the CPS rates of fuel duty.; You should continue to submit all claims for relief to the Mineral Oils Relief Centre (MORC) on form EX55 in the usual way. The amended EX55 has three additional boxes where you will be required to insert the quantity of fuel and the appropriate CPS rate for the fuel used.

As current fuel duty rates are higher than the CPS rates of fuel duty, the net effect should be a reduction in the amount of relief you can claim.

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Further information

TIIN - Budget 2012 (PDF 73K)

TIIN - L-day 2012 (PDF 58K)

Notice 175: Motor and heating fuels: relief from excise duty: oils used to generate electricity

TIIN - Carbon price floor: rates from 2015-16, exemption for Northern Ireland and technical changes (PDF 60K)

TIIN - Carbon price floor: reform and other technical amendments published on Budget day 2014 (Opens new window)

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