CRC Energy Efficiency Scheme may apply to UK properties held in trust

April 13th, 2013 by Spicer & Partners Guernsey LLP

(click image to expand - ©RLLord)

(click image to expand – ©RLLord)

John Stephens, Partner of Spicer & Partners Guernsey LLP, writes “organisations holding UK properties under trust are going to have to consider whether they need to register under the CRC Energy Efficiency Scheme as a CRC Participant.

This is a mandatory scheme and failure to comply can result in enforcement notices or civil penalties.

Energy efficiency regulation currently relies on a system of sticks and carrots: the CRC Energy Efficiency Scheme is one of the sticks.

The Scheme, even following recent simplification, is still criticised for being bureaucratic; some business organisations are calling for an alternative mechanism to encourage energy efficiency.

The UK Government has said that it was concerned about the ”loss of emissions from the Scheme” (energy-speak for non-compliance) by the trusts sector, hence its new, harsher, approach on registration.

The Scheme is approaching its Phase 2: the deadline for registration will be 31 January 2014.

The criteria for registration came into effect on 31 March 2013.

Although an organisation may not have been required to register under Phase 1, it may still have to do so under Phase 2, and some organisations may drop out of the Scheme in Phase 2, having been members of it in Phase 1.

In relation to property held through trusts, to determine which entity is going to be responsible for the purposes of the Scheme, it adopts a hierarchical approach.

In outline, this is as follows:

  • If there is a controlling beneficial owner, or an investor beneficiary with a majority share, that entity is responsible for the CRC tax and compliance. (There may be difficult enforcement issues here, so that liability may be thrown back on the trustees if the beneficiary cannot be ascertained);
  • If the trust is regulated under the Financial Services and Markets Act 2000, responsibility falls on the operator of the trust;
  • In all other cases, the trustee is responsible. All trusts administered by the trustee are to be aggregated and treated as a single potential CRC Participant. Individual trusts may then be disaggregated under the Scheme rules, which have been made more flexible. However, this approach is going to lead to a larger number of trustees having to register (and to supply energy consumption information) initially than would otherwise have been the case.
  • The qualifying consumption criteria for becoming a CRC Participant are pitched at a level of detail beyond the scope of this briefing, but roughly speaking an (aggregated) entity spending in excess of £500,000 on electricity during the qualification period (1 April 2012 to 31 March 2013) will generally be caught.

Next steps:

Potential Participants should be considering now whether they need to register. In particular, they should be analysing the entities that may form the group or aggregation of entities for which they will be accountable under the Scheme, establishing their energy consumption during the qualification period and registering if necessary.

They can then start to look at how to approach disaggregation and get their strategy worked out.

They may need to appoint a UK representative for any CRC Participant whose parent is overseas.

They may need to establish formal arrangements for continued monitoring and compliance.

As specialist commercial property and planning solicitors, Spicer & Partners Guernsey LLP would be happy to assist you in relation to any of the issues identified in this Legal Alert.

Spicer & Partners Guernsey LLP can help on the registration criteria, the steps required to register and disaggregation strategy, together with other compliance issues. Please speak to your usual contact initially or any of us at our email addresses.

This document is intended to be a general over-view of certain aspects of the Scheme only and does not constitute advice by the firm or the writer.

The requirements of the subject matter require detailed information on the individual circumstances and energy consumption of the entity concerned before we can provide advice.

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Originally published by Spicer & Partners Guernsey LLP website and republished on Sustainable Guernsey with permission.

© Spicer & Partners Guernsey LLP

 

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