Judgment given in R (Drax Power Ltd and another) v HM Treasury and others

Judgment given in R (Drax Power Ltd and another) v HM Treasury and others

CategoryNews Author Jennifer Thelen Date

On 10 February 2016, the High Court (Administrative Court) gave its judgment in R (Drax Power Ltd and another) v HM Treasury and others [2016] EWHC 228 (Admin) on the withdrawal of the exemption of renewable source electricity to the climate change levy (the “RSE Exemption”). Mr Justice Jay dismissed the challenge to the removal of the RSE Exemption brought by two renewable energy generators.

The climate change levy is a tax on electricity supplied to business consumers designed to encourage energy efficiency and reduce carbon emissions. As a result of the RSE Exemption, those supplying energy from a renewable source to business consumers were not required to pay that tax. The RSE Exemption worked by issuing, to qualifying renewable generators, Levy Exemption Certificates, or “LECs”. LECs would be sold to suppliers, who would then use the LECs to claim the exemption.

The RSE Exemption was removed with 24 days’ notice at the Summer Budget in July 2015. The rationale for its removal was that it was out-dated, inefficient and costly (estimated to cost the Government approximately £40 million/month). The Claimants contended that the withdrawal of the RSE Exemption at short notice contravened the EU law principles of foreseeability and proportionality, and violated their Article 1, Protocol 1 property rights. They sought a minimum two-year lead in time was required prior to removing the RSE Exemption.

In rejecting that claim, Mr Justice Jay determined that the Defendants had not promoted any legitimate expectation that the RSE Exemption would not be removed without a two-year lead time, and that a circumspect and prudent operator could have foreseen its removal. Further, there was no basis on which to conclude that the decision was in any way poorly conceived or rushed. The Defendants had advanced a compelling case that the reform was justified in the public interest and thus that the EU law principles of proportionality had not been violated.

Jennifer Thelen appeared on behalf of the Defendants, HM Treasury and HM Revenue & Customs.

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