FINANCE BILL 2000

CLAUSE 30: CLIMATE CHANGE LEVY

SUMMARY

1. This clause introduces a new tax on supplies of electricity, gas and certain other commodities capable of being used as a fuel. The new tax will be known as climate change levy and will be introduced on the business use of energy from April 2001. Its aim is to encourage energy efficiency, and help meet the UK's legally binding target for reducing greenhouse gas emissions set under the Kyoto Protocol.

DETAIL

2. Subsection (1) gives effect to Schedule 6 which makes provisions for the new tax that is to be known as climate change levy. Schedule 6 contains the details of the new tax including charging and accounting provisions and machinery provisions.

3. Subsection (2) gives effect to Schedule 7 which makes provision for consequential amendments to other pieces of legislation as a result of climate change levy.

4. Subsection (3) provides that the registration provisions of Schedule 6 do not come into force until such date as the Treasury may appoint. This is because the clause and attached schedules have force of law with effect from Royal Assent. However, the supplies of energy products do not become taxable supplies until 1 April 2001. Provision has to be made to postpone the registration requirement until such time as the registration system is in place.

BACKGROUND

5. Climate change is considered to be one of the greatest environmental threats facing the world. In response to the threat, some developed countries agreed at Kyoto in December 1997 to legally binding targets which will reduce their emissions of the six main greenhouse gases by 5.2% below 1990 levels over the period 2008-2012. The UK agreed to cut its emissions by 12.5%. The Government also has a more challenging UK goal of a 20% reduction in carbon dioxide emissions below 1990 levels by 2010.

6. The draft UK climate change programme will act as the framework for a long term, comprehensive strategy on climate change for the UK as a whole. Moving towards the UK's goal will also enable the UK to ensure that it will be better placed to meet future, more difficult, targets; it will send a strong signal to the international community that the UK is leading by example; and it will help safeguard the UK's competitiveness by encouraging a more energy efficient industry and by stimulating the development of new environmental technologies. It is specifically to address these last issues that climate change levy is to be introduced.

7. The purpose of climate change levy within this programme is to specifically encourage energy efficiency in business, agriculture and the public sector, and to reduce emissions of greenhouse gases from these sectors.

8. Business energy use accounts for about 40 per cent of the UK's emissions of carbon dioxide. Business has a special role to play as the principal source in the economy of technological innovation.

9. The Government believes that all sectors must play their part in contributing to improving energy efficiency and reducing emissions of greenhouse gases to contribute to meeting our climate change obligation.

10. The Government does not intend to introduce new taxes on the domestic use of fuel and power, for social policy reasons. However, the Government has announced a number of programmes to reduce greenhouse gas emissions from this sector.

11. The Government already has a fiscal strategy in place for reducing emissions from road transport in the form of pre-announced commitments on future changes in road fuel duties, so it does not propose to extend the levy to diesel, petrol and road fuel gases (Liquefied Petroleum Gas (LPG) and Compressed Natural Gas (CNG)) used by road vehicles. Other forms of energy used by public transport vehicles, for example electricity used by light railways, will not be subject to the levy.

12. Other mineral oils, i.e. gas oil, fuel oil and kerosene will not be subject to the levy because they are already within the scope of existing excise duties.

13. In order to increase the environmental effectiveness of the levy and protect competitiveness of UK business electricity generated from 'new' renewable sources of energy and in 'good quality' combined heat and power plant will be exempt from the levy. Furthermore, an 80 per cent discount will be offered for those energy intensive sectors - covered under the EU's Integrated Pollution and Prevention Control (IPPC) Directive - that sign energy efficiency agreements that meet the Government's criteria.

14. LPG will be offered a lower rate of levy in recognition of its use in rural areas, and to discourage fuel switching from LPG to more environmentally damaging fuels, and a transitional 50 per cent discount on the levy will be adopted for horticulture firms (for a period of up to 5 years).

SCHEDULE 6 - CLIMATE CHANGE LEVY

PART 1. THE LEVY

Paragraph 1. Climate Change Levy

This paragraph introduces the levy and makes the Commissioners of Customs and Excise responsible for its care and management.

Paragraph 2. Levy charged on taxable supplies

This specifies that the levy will be charged on taxable supplies and provides that any supply of a taxable commodity is a taxable supply unless excluded or exempt.

Paragraph 3. Meaning of "taxable commodity"

This lists the taxable commodities. To prevent double taxation products subject to the excise duty on hydrocarbon oils (and similar products) are not taxable. Waste containing taxable commodities is also not taxable . The Treasury is given the power to specify, by regulations, that commodities are or are not taxable commodities.

PART II. TAXABLE SUPPLIES

Paragraph 4. Introduction

This specifies that a supply of a taxable commodity is a taxable supply by reference to the specific scoping and exempting provisions contained in paragraphs 5-22.

Paragraph 5. Supplies of electricity

This creates a levy charge on a supply of electricity if made by an electricity utility to any person (including itself) but not to another electricity utility. It also provides for levy to be chargeable on electricity supplied by combined heat and power stations that only partly qualify for exemption and provides for a levy charge where there is a deemed self supply. No levy charge arises when supplies of electricity are made under any other circumstances.

Paragraph 6. Supplies of gas

This provides for a levy charge on a supply of any gas if made by a gas utility to any person (including itself) but not to another gas utility. It also makes provision for a levy charge where a supply of a gas of a kind supplied by a gas utility is made by an exempt unlicensed gas supplier (meeting a description to be prescribed by regulations) . It then specifies that a deemed self supply is chargeable with levy if gas of a kind supplied by a gas utility is held in a gaseous state immediately before being released for burning. There will be no liability for supplies of gas made under other circumstances.

Paragraph 7. Other supplies made in course or furtherance of business

This creates a levy charge on supplies of taxable commodities other than electricity or gas in a gaseous state. These will be mainly solid fuels and liquefied petroleum gases (LPG). Supplies of such products become liable if supplied in the course or furtherance of business.

Paragraph 8. Excluded supplies: supply for domestic or charity use

This excludes supplies made for domestic or charity use. It apportions supplies that are made only partly for domestic or charity use but allows total exclusion if the proportion of eligible supplies is 60% or more.

Paragraph 9. Excluded supplies: meaning of "for domestic use"

Subparagraph (1) identifies supplies which, due to their small size, are always considered to be for domestic use regardless of the premises to which they are supplied. The quantities concerned are identical to those currently used to establish eligibility for the reduced rate of Value Added Tax.

Subparagraph (2) identifies where larger supplies not falling within subparagraph (1) must be made if they are to be considered as being for domestic use.

Subparagraph (3) defines those places which are used for a relevant residential purposes within paragraph 9(2)(b). The definition excludes such places as hospitals, prisons, and hotels.

Subparagraph (4) provides that the power to vary the corresponding VAT provisions by order under section 2(1C) of the Value Added Tax Act 1994 also includes power to vary the levy provisions contained in this paragraph.

Paragraph 10. Excluded supplies: supply before 1st April 2001

This excludes any supplies made before 1st April 2001.

Paragraph 11. Exemption: supply not for burning in the UK

Subparagraphs (1) and (2) provide an exemption for supplies of taxable commodities other than electricity or gas in a gaseous state (mainly liquefied petroleum gases and solid fuels) that are made for onward supply or export from the United Kingdom. There is a requirement for the customer to notify the supplier in advance of the supply if this is the case. The onward supply provision is to ensure that supplies from one wholesaler to another or from a wholesaler to a retailer of, for example, coal are exempt until the eventual supply to the final consumer. That supply may then be taxable under the provisions of paragraph 7.

Subparagraph (3) makes similar provision for the export of electricity and gas in a gaseous state. The onward supply provision is not necessary for these products as wholesale supplies will normally be made by and to a utility and thus not chargeable under paragraphs 5 for electricity or 6 for gas.

Subparagraph (4) confirms that regulations to be made to deal with netting off where, for instance, gas is both imported and exported through the same pipeline.

Paragraph 12. Exemption: supply used in transport

Subparagraph (1) provides exemptions in specific circumstances for taxable commodities used for propulsion or other purposes by modes of transportation. This includes trains, certain other vehicles and ships. In effect, most supplies used for such purposes will be exempt subject to the exceptions listed in paragraph 12(3).

Subparagraph (2) provides definitions for trains, railway vehicles, and non-railway vehicles.

Sub-paragraph (3) provides that the exemption in sub-paragraph (1) does not apply to the in-house transportation of passengers to, from or within a variety of places such as those providing entertainment or cultural interest . This is because the transportation of such passengers is seen as secondary to the main purpose of the visit.

Paragraph 13. Exemption: supplies to producers of commodities other than electricity

This provides an exemption for supplies of taxable commodities used to produce taxable commodities (other than electricity) . This exemption does not apply to self supplies of electricity produced from taxable commodities.

In addition, the production of hydrocarbon oil and road fuel gas is covered as is the production of uranium for use in an electricity generating station . This avoids double taxation as these products are either liable to excise duty or will be used to produce taxable commodities.

Paragraph 14. Exemption: supplies (other than self-supplies) to electricity producers

Sub-paragraph (1) provides an exemption for supplies of taxable commodities made to persons for use in the production of electricity. This exemption does not apply to self supplied electricity produced from taxable commodities.

Sub-paragraph (2) provides an exemption for supplies of taxable commodities for use in a combined heat and power station. This exemption does not apply to self supplied electricity produced from taxable commodities.

Sub-paragraph (3) states that these exemptions do not apply in the case of supplies to exempt unlicensed electricity suppliers (meeting a description in regulations) who use the commodity for producing electricity. These suppliers are not defined as utilities. The electricity they produce will not be taxable under paragraph 5(1) so they will be taxed on commodities used to produce that electricity .

Subparagraph ( 4) creates a similar rule for autogenerators (persons who produce electricity primarily for their own consumption). They too will be taxed on commodities used to produce that electricity. However the exemption will apply should the electricity in question be used for a purpose that attracts a general exclusion or exemption under certain other provisions of Part II.

Subparagraph (5) defines an ?exempt unlicensed electricity supplier? as referred to in subparagraph (3).

Paragraph 15. Exemption: supplies (other than self-supplies) of electricity from partly exempt combined heat and power stations

Provides an exemption for supplies of electricity from partly exempt combined heat and power stations (excluding deemed self supplies). The production in question must not exceed any limit specified for that station in regulations ( stations that are only partly exempt will have an output limit set for CCL purposes and any electricity generated above this limit will be subject to taxation under paragraph 5(2)).

Paragraph 16. Exemption: self-supplies by electricity producers

This exempts deemed self supplies of electricity by producers in a number of different circumstances:

Subparagraph (2) exempts self supplies where the producer is an auto-generator (unless the supply is from a partially exempt combined heat and power station whose specified limit is thereby exceeded).

Sub-paragraph (3) exempts supplies from a fully exempt combined heat and power station (unless the producer is already exempt as an autogenerator).

Sub-paragraph (4) exempts supplies from a partially exempt combined heat and power station whose specified limit is not thereby exceeded (unless the producer is already exempt as an autogenerator).

Paragraph 17. Exemption: supply not used as fuel

Subparagraph (1) exempts supplies of taxable commodities where they are not intended to be used as fuel. This covers processes where there is use as a chemical reductant (such as in blast furnaces), or as a feedstock which is incorporated in the final product (such as natural gas used in the production of fertilisers) and use in certain electrolytic processes.

Subparagraphs (2) and (3) give the Treasury the power to make regulations specifying the uses that are or are not eligible for exemption under subparagraph (1) and the factors that must be taken into account in exercising the power. Provision may be made for mixed uses.

Paragraph 18. Exemption: electricity from renewable sources

This provides for electricity generated from renewable sources to be exempt from the levy if supplied under a contract containing a renewable source declaration, and where the supplier and the generator agree to meet certain prescribed conditions. The exemption also applies to electricity used by the producer for purposes which are not otherwise exempt from the levy (but does not apply to self supplies of electricity from taxable commodities).

Sub-paragraph ( 2) defines a renewable source declaration by reference to the overall result predicted as measured over a rolling averaging period (further developed in paragraph 19).

Subparagraphs (3),(4), (5), (6) and (7) allow the Commissioners of Customs and Excise to make regulations setting out -

the circumstances in which electricity may be regarded as renewable source electricity ( taking account of certain factors) ; and
the relevant conditions which have to be agreed to and fulfilled by the supplier and the generator.

Sub-paragraphs (5) and (8) allow conditions to be prescribed which will ensure that the Gas and Electricity Markets Authority, together with the Director General of Electricity Supply for Northern Ireland, will undertake verification of part of the exemption and be able to provide the Commissioners of Customs and Excise with information needed by the Commissioners to exercise their care and management of the tax.

Paragraph 19. Exemption under 18 : averaging periods

This provides for the suppliers to be able to balance their purchases and supplies of renewable source electricity looked at over a period of up to two years, and so cater for variations in supply and demand, for the purposes of making a renewable source declaration. If at the end of a two year period supplies exceed purchases of renewable source electricity then the supplier will have to account for levy, at the appropriate rate, on the balance.

Paragraph 20. Regulations giving effect to exemptions

This gives the Commissioners of Customs and Excise the power to make regulations giving effect to the exclusions and exemptions contained in paragraphs 8-19.

Paragraph 21. Deemed supply: use of commodities by utilities and producers

This provides that where an electricity utility consumes its electricity, a gas utility burns its gas or a person producing a taxable commodity burns or consumes it, they shall be deemed to have made a supply to themselves. (Regulations may make special provision for non-utility electricity in terms of the extent to which it should or should not be regarded as produced from taxable commodities.) This is to ensure that where the commodity has been used for a taxable purpose, such as the lighting and heating of administration facilities, producers are treated on the same way as other commercial or industrial consumers.

Paragraph 22. Deemed supply: change of circumstances or intentions

In situations where a change of circumstances or intentions at a later date results in a supply originally considered not taxable becoming so, the person receiving the supply is deemed to have made a taxable supply of the commodity to himself.

Sub-paragraph (2) ensures that this does not override the exemption for renewable source electricity.

Subparagraph (3) covers a straightforward change of circumstances or intentions.

Subparagraph ( 4) covers a change in the status of premises.

Finally, subparagraph (5) gives the Commissioners of Customs and Excise powers to specify events as or as not constituting changes or these purposes.

Part III. TIME OF SUPPLY

Paragraph 23. Introduction

The purpose of this paragraph is to introduce Part III, and to explain that this part deals with the determining the time of supply for Climate Change Levy.

Paragraph 24. Electricity or gas: supply when climate change levy accounting document issued.

The purpose of this paragraph is to create a time of supply for electricity and for gas of a kind supplied by a utility, so that the time of supply occurs whenever a climate change levy accounting document is issued. The extent of the supply is the amount of the supply shown on the document.

The final sub-paragraph provides that these time of supply provisions do not apply to supplies made under a special utility scheme.

Paragraph 25. Electricity or gas: duty to issue climate change levy accounting document

This paragraph applies to supplies of electricity and gas of a kind supplied by a utility. The purpose of this paragraph is to ensure that accounting documents are issued within set times, so as to ensure that amounts of levy are regularly accounted for, which accurately reflect the amount of commodity consumed or burned. This is felt to be especially important in the absence of a payment tax point. Suppliers tend to bill on either monthly or quarterly cycles, some of which may be longer or shorter than others. Larger customers tend to be monthly billed, and other customers tend to be quarterly billed. The purpose of using periods of six and fifteen weeks is to reduce the administrative impact of the levy so that suppliers may continue to use their existing billing cycles without normally being in breach of the provisions. It is not intended that suppliers will deliberately lengthen billing cycles to delay the point at which levy is declared.

The paragraph provides the power to define small users in secondary legislation.

The paragraph is also intended to stipulate that any accounting document must always cover all unbilled consumption which is not covered by an earlier accounting document.

The clause also sets out what information should be displayed on a climate change levy document.

The final sub-paragraph provides that these time of supply provisions do not apply to supplies under a special utility scheme, or to any electricity or gas actually supplied before the commencement of the levy.

Paragraph 26. Electricity or gas: actual supply not followed by climate change levy accounting document

This paragraph defines when a supply is treated as taking place where a supplier does not issue a climate change levy accounting document as required in paragraph 24. Under this paragraph, the time of supply is the end of the period of either six or fifteen weeks depending upon whether the user is large or small. The amount of the supply is also intended to be a reasonable estimate in the absence of actual information.

The final sub-paragraph provides that these time of supply provisions do not apply where there is a relevant special utility scheme, to any electricity or gas actually supplied before the commencement of the levy, or to certain supplies of electricity or gas that are deemed to take place on 1st April 2001.

Paragraph 27. Electricity or gas: special utility schemes

This paragraph recognises that some suppliers of electricity or gas use non standard methods of billing customers and that in these cases, it may be administratively difficult for a supplier to comply with the time of supply provisions outlined in the previous paragraphs. The purpose of this paragraph is to allow the Commissioners to grant approval for a supplier to use a special utility scheme which determines time of supply treatment for electricity and gas which is covered by the scheme. It is intended that the scheme will have the effect that levy is accounted for on monthly and quarterly cycles in accordance with the normal provisions.

The paragraph provides that such a scheme may also be granted to persons who are accounting for levy under paragraphs 5(2) or 6(2) (partly exempt CHP stations and exempt unlicensed gas suppliers), as these have been identified as the supplies who may find it difficult in all cases to administer the time of supply provisions already described.

The paragraph stipulates that a scheme must specify the period over which it is to operate and that, for it to take effect the person must elect in writing to be bound by it for that period.

In addition, the paragraph says that a scheme may cover all or any of the electricity or gas supplied, and that a scheme may disapply or modify the normal time of supply treatment at the introduction of the levy, or for changes in rate of the levy.

The paragraph also provides for regulations to be made which make further provision for special utility schemes (including the amendment of this paragraph).

Paragraph 28. Other commodities: general rules for supply by UK residents

This paragraph applies to taxable commodities other than electricity or gas of a kind supplied by a utility.

The purpose of this paragraph is to provide time of supply provisions for all other taxable commodities.

These provisions are based on the VAT supply of goods provisions and this paragraph provides a basic time of supply linked to the physical removal or in some cases the making available of the commodities These may be over-ridden by following paragraphs.

Paragraph 29. Other commodities: earlier invoice

These provisions are based on the VAT supply of goods provisions, and follow on from the previous paragraph 28. As such, these provisions do not apply to supplies of electricity or gas of a kind supplied by a utility. The purpose of this paragraph is to provide an earlier time of supply for other commodities where an invoice or payment precedes the physical movement of the commodity. The time of supply is when the invoice is issued, and the extent of supply is the amount of the commodity shown on the invoice, or the amount of the commodity which corresponds to the amount paid.

Furthermore, these conditions are stipulated as not applying where a commodity is removed on sale or removal terms before it is known whether a supply will take place. This is to avoid levy being chargeable when a supply has not in fact taken place.

The final sub-paragraph makes clear that a direction regarding tax points by the Commissioners under paragraph 33(3) takes precedence over this paragraph.

Paragraph 30. Other commodities: later invoice

These provisions are based on the VAT supply of goods provisions and follow on from the paragraph 28. As such, these provisions do not apply to supplies of electricity or gas of a kind supplied by a utility. The purpose of this paragraph is to provide a condition that if within 14 days of a commodity being removed, or if not to be removed, when made available (28(2)) then the time of supply is treated as being delayed to the time of issue of the invoice. This is to ensure that where a supplier issues timely invoices, the time of supply becomes the issue of the invoice, rather than the time of removal, which is generally easier for the person accounting for the levy to administer.

The provisions also explain that these provisions do not apply where

an invoice has been issued before the commodity was removed. The reason for this is that the time of supply for the levy in question should already have occurred, or
where the person liable to account for the levy so elects to Customs.

Sub-paragraph 3 provides that, where a person requests, the Commissioners may direct that a longer period is substituted for the 14 day period.

The final sub-paragraph makes clear that a direction by the Commissioners regarding tax points under paragraph 33 takes precedence over this paragraph.

Paragraph 31. Other commodities: supply by non-UK residents

These provisions do not apply to supplies of electricity or gas of a kind supplied by a utility. The purpose of this paragraph is to ensure that where a supply is made by a non UK resident, the supply is treated as taking place when the commodity is delivered, or if earlier, when it is made available in the UK to the customer. The purpose of this paragraph is to recognise that an alternative provision is appropriate in these circumstances not least because a UK customer might not know when the goods were removed from their original location.

This paragraph applies subject to a further condition whereby if the customer elects in writing within 14 days of the time above, the time of supply is delayed to the time of the election.

This paragraph also applies subject to the provisions in paragraph 32, deemed supplies.

Part 3(c) makes clear that a direction by the Commissioners regarding tax points under paragraph 33 takes precedence over this paragraph.

Paragraph 32. Other commodities: deemed supplies

These provisions do not apply to supplies of electricity or gas of a kind supplied by a utility.

The purpose of this paragraph is to create a time of supply for other commodities which have been deemed a taxable supply by the provisions in paragraph 21 or 22, which would not otherwise have a time of supply.

The time of supply for own use by a utility or producer is the time of consumption or burning accordingly.

The time of supply where there is a change of circumstance or intention is the change itself.

Paragraph 33. Other commodities: directions by Commissioners

These provisions do not apply to supplies of electricity or gas of a kind supplied by a utility.

The purpose of this paragraph is to permit the Commissioners, (where a request has been made by a person liable to account for levy) to make a direction which alters the time at which certain or all supplies are treated as taking place. The paragraph describes the extent of the Commissioners? direction, and stipulates that in all cases the direction must result in an earlier time of supply than would otherwise be the case.

The final sub-paragraph stipulates that a direction under this paragraph will not overrule any time of supply determined by the earlier invoice rule in paragraph 29(1).

Paragraph 34. Supplies invoiced or paid for before 1st April 2001

The purpose of this paragraph is to prevent any person avoiding the levy through artificially advancing the time of supply to before the introduction of the levy.

The paragraph provides time of supply provisions which will take precedence over the normal provisions in such cases. Where these provisions apply, the time of supply is treated as taking place on 1st April 2001.

However, the paragraph provides that in the case of acceptable normal practice, as described within the paragraph, the normal time of supply provisions will continue to apply.

The aim is to ensure that no avoidance schemes succeed in avoiding the intended introduction and application of the levy.

Paragraph 35. Supplies of electricity of gas spanning change of rate etc

This paragraph applies to supplies of electricity and gas of a kind supplied by a utility, and is based on existing VAT provisions, namely section 88 Value Added Tax Act 1994.

The purpose of this paragraph is to provide an equitable transitional treatment of the levy on the introduction of the levy or whenever there is a relevant change in rate, or a change in what is a taxable supply.

This paragraph details what time of supply treatment is applicable.

This paragraph is only intended to apply to supplies which are affected by the change, and only when the person liable to account to the levy so elects, otherwise the normal time of supply provisions continue to apply.

The paragraph stipulates that these provisions do not apply where the anti-avoidance provisions of paragraph 34 treat the supply as taking place on 1 April 2001.

Paragraph 36. Other supplies spanning change of rate etc.

These provisions do not apply to supplies of electricity or gas of a kind supplied by a utility.

The purpose of this paragraph is to provide an equitable transitional treatment of the levy whenever, for example, there is a change in rate, or in what is a taxable commodity. It is based on existing VAT provisions, namely section 88 Value Added Tax Act 1994.

This paragraph recognises that the time of supply for other commodities is based on the physical movement of the commodity, but that, a special treatment e.g. paragraph 29, issue of an invoice may over-ride the time of supply. Where there is a change as described above, the person who is liable to account for the levy may elect that the time of supply is determined without regard to the special provisions.

Paragraph 37. Regulations as to time of supply

The purpose of this paragraph is to provide the Commissioners of Customs and Excise with power to make regulations to determine time of supply in certain difficult cases.

PART IV - PAYMENT AND RATE OF LEVY

Paragraph 38. Persons liable to account for levy

The person liable to account for the levy is the person making the supply. The exception to this is when the taxable supply is made by a person who is not resident in the UK, and is not a utility eg a Polish coal merchant. In this case the person to whom the supply is made will be liable to account for the levy eg the coal importer.

Paragraph 39. Returns and payment of levy

This paragraph provides regulation making power to cover the mechanics of rendering returns and making payment of levy, eg the regulations may make provision for accounting periods, form and manner of returns, and for requirements surrounding payments, eg due date for payment.

Regulations may also cover provisions, amongst others, for levy for one accounting period being treated as due for a different period; correction of errors when accounting for levy; entries to be made in accounts for correction of errors and for financial adjustments to be made in that connection.

Failure to comply with regulations covering rendering returns and making payments on time, may result in a penalty of £250. Liability to penalty shall not arise if the person satisfies the Commissioners (or Tribunal) that there was a reasonable excuse for failing to render by due date, and a reasonable excuse for failing to render until such time as they did render.

If as a result of a failure to render return or make payment on time the person is convicted of an offence or assessed to a penalty for evasion then they will not be also subject to a penalty under this paragraph.

Paragraph 40. Amount payable by way of levy

This paragraph sets out the rates of levy. The rates given in the Table are the standard rates. Where a supply is subject to a half-rate or reduced rate, this is calculated as 50% or 20% of the standard rate respectively.

Paragraph 41. Half rate for supplies to horticultural producers

This provides for a half rate to be charged on supplies of taxable commodities to horticultural producers for use in certain circumstances in growing horticultural produce, and defines all the terms.

Sub-paragraphs (4), (5) and (6) allow the Commissioners of Customs and Excise to make regulations covering the administration of the half rate, including allowing the suppliers to treat suppliers to horticultural producers as if they were full rate supplies, with the difference being claimed by the horticultural producer from Customs and Excise

Paragraph 42. Reduced-rate for supplies covered by climate change agreement

This paragraph sets out the arrangements for reduced-rate supplies covered by a climate change agreement. Where the Secretary of State gives a certificate to the Commissioners that a facility is covered by a climate change agreement for a period of time, the Commissioners shall publish a notice in respect of that facility. The notice shall identify the facility and the dates set out in the Secretary of State's certificate.

A reduced-rate supply will be a taxable supply which is made to a facility identified in a notice published by the Commissioners within the specified period.

The Commissioners will be able to make regulations for the purpose of determining whether any taxable commodity is supplied to a facility. In particular, provision may be made for a taxable commodity to be taken as supplied to a facility only if the commodity is delivered to the facility.

Paragraph 43. Reduced-rate supplies: variation of notices under paragraph 42

This paragraph provides for the Secretary of State to vary a certification. A variation certificate may either state that a facility is no longer to be taken as being covered by a climate change agreement, or that a facility is not to be taken as being covered by a climate change agreement after a specified date.

Where the Commissioners receive a variation certificate then, if they have already published a notice under paragraph 42 in respect of the facility concerned, they shall publish a variation notice setting out the new information. If they have not already published a notice in respect of the facility, then they shall publish a notice in response to the original certificate as varied by the variation certificate.

A supply to a facility identified in a variation notice will cease to be a reduced-rate supply after the date on which the variation note is published (or in accordance with the Secretary of State's certificate if that provides for a later date).

Paragraph 44. Climate change agreements

The purpose of this paragraph is to set out that there may be two forms of climate change agreement, as described in paragraphs 45 and 46.

Paragraph 45. Climate change agreements: direct agreements with the Secretary of State

This paragraph describes the first form of climate change agreement. This is an agreement entered into with the Secretary of State in relation to the climate change levy which identifies the facilities to which it applies, which sets targets for these facilities, which sets certification periods (as set out in paragraph 47), and which provides for reviews of the targets at least every five years. The agreement would need to be entered into by the operators of the facilities or by a person acting on the operator's behalf.

Paragraph 46. Climate change agreements: combination of umbrella and underlying agreements

This paragraph describes the second form of climate change agreement. In this case, a climate change agreement is a combination of an umbrella agreement and an underlying agreement.

Between them, the two agreements must set targets for the facilities to which the underlying agreement applies, they must specify certification periods (as set out in paragraph 47), and they must provide for reviews of the targets at least every five years.

Further requirements are set out for the umbrella agreement and for the underlying agreement.

Paragraph 47. Climate change agreements: supplemental provisions

This paragraph provides for the Secretary of State to take a facility as being covered by a climate change agreement when the facility joins the agreement (or from 1 April 2001 if the facility joins an agreement before then). Thereafter, the Secretary of State may take a facility as being covered by an agreement if it appears to him that progress towards meeting targets set by the agreement for the facility is satisfactory.

Targets are described as relating to energy used within a facility or group of facilities, or emissions from a facility or group of facilities. A climate change agreement may provide that progress towards meeting any targets for a facility is to be taken as being satisfactory if, in the absence of any such progress required under the agreement, alternative requirements provided for by the agreement are satisfied.

This paragraph also specifies that the Secretary of State is not required to enter into any climate change agreement or approve of any agreement.

Paragraph 48. Facilities to which climate change agreements can apply

The purpose of this paragraph is to set out whether a facility may be eligible to be covered by a climate change agreement. A facility may consist of an installation described in paragraph 49 or a site on which there is such an installation (or a number of such installations or parts of such installations). The paragraph provides for the Secretary of State to make regulations to make provision for an installation or site to be a facility only if the energy use within the installation or site satisfies the conditions specified in the regulations.

Paragraph 49. Energy-intensive installations

This paragraph describes energy intensive installations.

Paragraph 50. Power to vary the installations covered by paragraph 49

This paragraph provides for the Treasury to make provision by regulations for varying the installations covered by paragraph 49.

PART V - REGISTRATION

Paragraph 51. Requirement to be registered

This paragraph requires someone to be registered if a taxable supply is made in respect of which he is the person liable to account for the levy charged. The Commissioners shall keep a register of person liable to account for the levy, and shall keep on it such information as they consider appropriate.

Paragraph 52. Interpretation of Part V

This paragraph explains the references to register, registering a person and a persons registration within Part V

Paragraph 53. Notification of registrability etc

A person must notify the Commissioners if he intends to make or have made to him, any taxable supply in respect of which he will be the person liable to account for the levy. Failure to do so may result in a penalty equal to 5% of the relevant levy (or £250 if greater or there is no relevant levy). Relevant levy refers to the levy for which the person is liable to account for, from the date on which he was required to notify, to the date on which he actually notifies or the Commissioners become aware of his requirement to be registered.

However failure to notify a requirement to register will not incur a penalty if the person satisfies the Commissioners (or a Tribunal) that he has a reasonable excuse for the failure. If a person by reason of any conduct mentioned above has been convicted of an offence or assessed to a penalty for evasion, he will not also receive a penalty under this paragraph.

Paragraph 54. Form of registration

The Commissioners shall register a person if they receive a notification from him or it appears to them that he is required to be registered. They shall register the latter with effect from the time when the requirement arose. Provision is also made for companies to be registered in groups or divisions. The paragraph also provides for the registration of a partnership/unincorporated body to be in the name of the firm or body.

Paragraph 55. Notification of loss or prospective loss of registrability

A person must notify the Commissioners if they cease to be registrable for the levy. Failure to do so may result in a penalty of £250.

Paragraph 56. Cancellation of registration

When the Commissioners are satisfied that a person is no longer registrable (ie is on longer liable to account for levy charged) they may cancel his registration with effect from the last time he made or had made to him relevant supplies. The Commissioners have to be satisfied that certain conditions are met before cancelling a registration eg that no levy remains unpaid. If they are satisfied that a person was registered at a time he was not actually required to be registered, they may cancel his registration with effect from the date of registration.

Paragraph 57. Correction of the register etc

This paragraph provides a regulation making power to deal with correcting the register. Regulations may require registered persons and those required to be registered to notify the Commissioners of changes in circumstances which affect information contained in the register.

Paragraph 58. Supplemental regulations about notifications

This paragraph provides a regulation making power to cover the details surrounding notification of a requirement relating to registration eg time within which notification is to be given etc.. An obligation may also be imposed on a person who has notified the Commissioners to notify them again if any information given earlier becomes inaccurate. Finally provision may be given to extend the time for giving notification.

Paragraph 59. Publication of information on the register

This paragraph enables certain information from the register to be lawfully published by the Commissioners eg names of registered persons. It is left to Commissioners discretion how any information may be published.

Part VI. CREDITS AND REPAYMENTS

Paragraph 60. Tax Credits

The purpose of this paragraph is to allow for regulations to deal with the treatment or payment of certain refunds, credits and bad debt relief .

This includes a number of situations where a charge to levy has arisen, and it transpires that, or there is a change such that, all or part of the charge ought to be credited to the payer.

The provisions may include treatment for a person being entitled to a tax credit, which is offset against a payment, when submitting a CCL return, and also making a repayment claim from the Commissioners when it is not possible to offset.

Furthermore, the provisions may make the entitlement to a tax credit conditional on the person making a claim within such a time, and in such a manner as may be required. Other conditions may also be imposed including evidence and the keeping of records.

Interest may be provided for at a rate under section 197 of the Finance Act 1996. The paragraph also stipulates that these regulations will be subject to the supplemental provisions of paragraph 62.

Paragraph 61. Repayments of overpaid levy

The purpose of this paragraph is to provide that the Commissioners must repay any money that was paid to them as levy, but which is not levy due.

The paragraph ensures that any amount eligible to be credited or repaid under paragraph 60 is not also payable under this paragraph.

The paragraph enables the Commissioners to make regulations to define the form and manner of such claims. The paragraph also stipulates that these regulations will be subject to the supplemental provisions of paragraph 62.

Paragraph 62. Supplemental provisions about repayments etc

This paragraph provides a time limit such that the Commissioners will not be liable to repay any amount paid to them more than three years before the claim was made.

Furthermore, claims need not be paid where the claimant would be unjustly enriched. Special rules apply in demonstrating what is not covered by this when, effectively, another person has borne the cost of the sum in question.

Paragraph 63. Reimbursement arrangements

This paragraph enables the Commissioners to make regulations whereby reimbursement arrangements for neutralising the unjust enrichment barrier in paragraph 62(2) can be disregarded except where those arrangements contain certain provisions, are supported by certain undertakings and certain other matters are satisfied.

Paragraph 64. Interest payable by the Commissioners

This paragraph provides that in circumstances where, due to an error by the Commissioners, a person either:

pays an amount which was not levy due, and as a result is entitled to a refund, or
has failed to claim a repayment for a tax credit to which he was entitled under any tax credit regulations, or
has suffered a delay in receiving payment of an amount due from the Commissioners in connection with the levy

then to the extent for which interest is not already provided, interest shall be payable on the amount for the relevant period.

Furthermore, the paragraph provides various definitions and provides that certain factors outside the Commissioners? control shall be disregarded so that interest will not be due in those circumstances.

Paragraph 65. Assessment for excessive repayment

This paragraph provides that where the Commissioners have repaid levy, and the repayment exceeds the amount properly due, then the excess may be recovered.

Paragraph 66. Assessments for overpayments of interest

This paragraph provides that where an amount of interest has been paid to a person under paragraph 64 and the person was not entitled to the amount under that paragraph, the Commissioners may assess the amount using their best judgement, with a view to recovery.

Paragraph 67. Assessments under paragraphs 65 and 66

This paragraph provides a time limit in making an assessment. The limit is two years after the Commissioners believe that they have sufficient evidence to warrant an assessment. Once assessed and notified the amount shall be recoverable as if it were levy due, though not if the assessment has been withdrawn.

Paragraph 68. Interest on amounts assessed

Where a repayment has been paid to someone not entitled to it, the amount shall carry interest. Penalty interest applies generally to tax credits claimed without entitlement. Other assessments, and an assessment to reclaim an amount paid through withdrawn bad debt relief, shall only be subject to ordinary interest. The interest shall run from Theda after the person is notified until the day before the assessment is paid.

Penalty interest is compound interest calculated at the penalty rate, and calculated on a daily basis but added to the principal once a month. The penalty rate is the ordinary interest rate under section 197 of the Finance Act 1996 plus 10 percentage points.

The Commissioners (or a Tribunal) may reduce the penalty interest to any amount including nil. Furthermore where a person satisfies the Commissioners (or a Tribunal) that there is a reasonable excuse for the liability to pay penalty interest, this reasonable excuse may be taken into account in determining any reduction. The following are not to be considered a reasonable excuse

(a) insufficiency of funds

(b) no significant loss of levy

An appeal Tribunal may cancel any reduction previously made by the Commissioners.

Paragraph 69. Assessments to interest under 68

Where a person is liable to interest the Commissioners may assess and notify him. Interest under this paragraph may go back no further than two years from the date of the assessment. An amount assessed is recoverable as if it were levy due, but not if the assessment is withdrawn. Any assessment under 68 must specify a date to which the amount of interest relates. If interest keeps accruing then further assessments can be made. However, the Commissioners may also provide a date for payment on an assessment and if the interest is paid within that time no further interest accrues.

Paragraph 70. Supplementary assessments

Where the amount of repayment or interest assessed is too low, then a supplementary assessment may be made for the excess but subject to the original time limit.

Paragraph 71. Set-off of or against amounts due under this Schedule.

This paragraph allows regulations to make provision for setting off amounts when a person owes levy but Customs and Excise are liable to repay levy or other taxes and duties under their care and management .

Paragraph 72. Set-off of or against other taxes and duties

This paragraph allows regulations to make provision for setting off amounts when a person owes other taxes or duties under the care and management of Customs and Excise but they are liable to repay levy.

Paragraph 73. Restriction on powers to provide for set-off

Regulations under 71 and 72 shall not require the "credits" to be set-off against the "debts" in certain cases involving insolvency procedures.

Paragraph 74. Part VI: Supplemental provisions

Notifications of assessments under Part VI to a persons representative shall be treated as notification to the person in relation to whom the representative acts. Representative in relation to any person includes, that person's personal representatives, and that person's trustee in bankruptcy or liquidator etc..

PART VII - RECOVERY AND INTEREST

Paragraph 75. Recovery of levy as debt due

This paragraph provides for levy to be recoverable as a debt due to the Crown.

Paragraph 76. Assessments of amounts of levy due

Paragraph 77. Supplementary assessments

These paragraphs empower the Commissioners in certain circumstances to assess amounts of levy due and if necessary make supplementary assessments where the original assessment was too low. For example, the Commissioners may assess an amount of levy as being due where a taxpayer or his representative has failed to render a return for a particular accounting period.

These paragraphs also provide that where an assessment is made for a period which follows a period where the return is still outstanding, the Commissioners may issue a larger assessment than they would have if the return for the earlier period had been rendered.

Amounts assessed and notified are recoverable as an amount of levy due (except to the extent that the assessment is withdrawn or reduced).

Paragraph 78. Time limits for assessments

This paragraph establishes time limits within which the Commissioners may issue assessments under paragraphs 76 and 77. The basic limit is two years after the end of the relevant accounting period but, in addition, there is one year from when sufficient evidence reaches the Commissioners which they believe justifies an assessment. The absolute maximum time limit for assessments is three years after the relevant accounting period. But if someone is convicted of an offence involving fraud and levy has been lost as a result, or there is a loss as a result of evasion and failure to notify registrability, the time limit extends to twenty years.

Certain time limits also apply on assessments issued after the taxpayers death.

Paragraph 79. Ordinary interest on overdue levy paid before assessment

Interest attaches to amounts paid which render unnecessary an assessment that could otherwise have been made.

Paragraph 80. Penalty interest on unpaid levy

This paragraph provides for interest at the penalty rate to be charged on the amount of levy shown on a return but that is unpaid. The period for which penalty interest will be charged begins with the day after the due date of the return and payment (in accordance with regulations) and ends with the day before that on which the amount is paid.

Paragraph 81. Penalty interest on levy where no return made

This paragraph provides for interest at the penalty rate to be charged on the assessed amount of levy where no return has been made. The period for which penalty interest will be charged begins with the day after the due date of the return and payment (in accordance with regulations) and ends with the day before that on which the assessed amount is paid.

Penalty interest is not charged under 80 and 81 in respect of the same event.

Paragraph 82. Ordinary and penalty interest on under-declared levy

This paragraph provides for interest to be charged on assessments issued after a return has been received. These assessments are in addition to any amount shown on the return or previously assessed. The period that shall carry interest begins the day after due date of the return and payment for the accounting period in question and ends on the day before the additional amount is paid.

The part of the period which runs from the due date of the relevant return to the date when the assessment is notified shall carry ordinary interest, the remainder carries penalty interest. The notification of assessment may carry a date for payment. If the sum is paid no later than this date then only the ordinary interest accrues up to the day before notification.

Paragraph 83. Penalty interest on unpaid ordinary interest

This paragraph makes provision for charging penalty interest on amounts of unpaid ordinary interest for the period beginning on the day when the assessment is notified and ending the day before the day the assessment is paid. However, when the Commissioners make an assessment of ordinary interest, they may specify a date for payment. If the assessed interest is paid no later than that date then this penalty interest does not apply.

Paragraph 84. Penalty interest

This paragraph provides that penalty interest is compound interest calculated at the penalty rate, and calculated on a daily basis but added to the principal once a month. The penalty rate is the ordinary interest rate under section 197 of the Finance Act 1996 plus 10 percentage points.

The Commissioners (or a Tribunal) may reduce the penalty interest (incurred under paragraphs 80 to 83) to any amount including nil. Furthermore where a person satisfies the Commissioners (or a Tribunal) that there is a reasonable excuse for the liability to pay penalty interest, this reasonable excuse may be taken into account in determining any reduction. The following must not be considered a reasonable excuse -

(a) insufficiency of funds

(b) no significant loss of levy

Paragraph 85. Supplemental provisions about interest.

This paragraph makes supplemental provisions about interest and provides that interest under 79 to 83 shall be paid without any deduction of income tax.

Where interest has been charged which turns out not to be due, the paragraph treats interest, in these cases, as never having been due and allows all reasonable adjustments to be made including those by way of repayment (subject to paragraphs 62 to 74).

Paragraph 86. Assessments to interest

This paragraph provides for the mechanics of making an assessment of interest under paragraphs 79 to 83. Some of the details are as follows.

Where a person is liable to interest under 79 to 83, the Commissioners may assess the amount due and notify it to him. If this assessment is too low, then they may make a supplementary assessment of the extra amount and must notify that person accordingly. Where an amount has been assessed and notified under this paragraph, then it is recoverable as if it were levy due. However, there is no requirement for interest to be payable on interest except under 83 (Penalty interest on unpaid ordinary interest) and in so far as it is compounded in accordance with 84.

Similar time limits as for assessments of levy apply for the assessments to interest. Assessments of levy and assessments of interest for the same accounting periods may be combined and notified as one assessment.

Paragraph 87. Further assessments to penalty interest

Notice of assessment to penalty interest must contain a date to which the amount of interest is calculated. (If interest continues to accrue, further assessments may be made.) The Commissioners may also provide a date for payment on an assessment and if the interest is paid within that time no further interest accrues beyond the date already specified.

Paragraph 88. Walking possession agreements.

This paragraph applies where a distress is authorised to be levied on a person's goods for non-payment of levy, in accordance with regulations, and both the person levying distress and the person in default have entered into a walking possession agreement. For the purposes of this paragraph a walking possession agreement allows the goods to remain with the person in default subject to certain conditions, eg that the person in default cannot remove the items without the consent of the Commissioners.

Where a person is in breach of this agreement, he is liable to a penalty of one half of the relevant levy or related amount. He is not liable to the penalty if he satisfies the Commissioner (or Tribunal) that there is reasonable excuse for the breach.

This does not apply to Scotland.

Paragraph 89. Interpretation etc of Part VII

Penalty interest shall be construed in accordance with paragraph 84. Notifications of assessments under Part VII to a persons representative shall be treated as notification to the person in relation to whom the representative acts. Representative in relation to any person includes, that person's personal representatives, and that person's trustee in bankruptcy or liquidator etc.

Part VIII. EVASION, MISDECLARATION AND NEGLECT

Paragraph 90. Criminal offences: Evasion

This paragraph is based on existing provisions for other taxes.

The purpose of this paragraph is to provide that certain evasions of the levy are a criminal offence.

Furthermore, the paragraph lays down the maximum sentence for a person found guilty of committing an offence.

Paragraph 91. Criminal offences: Misstatements

This paragraph is based on existing provisions for other taxes.

The purpose of this paragraph is to provide that certain conduct in connection with the levy is a criminal offence.

Furthermore, the paragraph lays down the maximum sentence for a person found guilty of committing an offence.

Paragraph 92. Criminal offences: Conduct involving evasions or misstatements

This paragraph is based on existing provisions for other taxes.

The purpose of this paragraph is to provide that certain conduct in relation to the levy are criminal offences. Furthermore, the paragraph lays down the maximum sentence for a person found guilty of committing an offence.

Paragraph 93. Criminal offences: Preparations for evasion

This paragraph is based on existing provisions for other taxes.

The purpose of this paragraph is to provide that certain preparatory acts in connection with evasions of the levy are a criminal offence.

Furthermore, the paragraph lays down the maximum sentence for a person found guilty of committing an offence.

Paragraph 94. Offences under paragraphs 90 to 93: procedural matters

This paragraph provides that sections 145 to 155 of the Customs and Excise Management Act 1979, which provide for general provisions as to legal proceedings, shall apply in relation to offences and penalties under paragraphs 90 to 93 as they apply in relation to offences and penalties under the customs and excise Acts.

The purpose of this paragraph is to provide for consistency of treatment with other customs? investigations.

Paragraph 95. Arrest for offences under paragraphs 90 to 92

This paragraph provides for the power of arrest where an authorised person has reasonable grounds for suspecting that both a relevant fraud offence has been committed and that the person in question is guilty of the offence.

The paragraph provides a definition of an "authorised person" and a "fraud offence".

Paragraph 96. Civil penalties: Evasion

This paragraph provides for the issue of a civil penalty for some cases of dishonest evasion of levy. The purpose of this paragraph is to provide for an option of treating some cases with a civil, rather than a criminal sanction in line with other taxes.

To become liable to a penalty , a person with a view to evading levy must engage in dishonest conduct (but not necessarily criminal) .

If a person is registered or registrable, the amount of the penalty will be equal to the amount of the levy evaded or intended to be evaded.

If a person is not registrable, the amount of the penalty will be twice the amount. The reason for this is that if a person is not registrable, it is not possible to issue that person with an assessment for the levy which should have been charged.

Both these penalties may be mitigated by the powers within paragraph 102.

Paragraph 97. Liability of directors etc. for penalties under paragraph 96

The purpose of this paragraph is to provide the Commissioners with the power to issue a penalty under paragraph 96 to a company and also to a certain officers of the company where that person has connived in the evasion.

This safeguards the personal position of officers of the company who were not involved in the evasion, and also enables the Commissioners to pursue a responsible person who was involved in the evasion where a company has insufficient assets to pay any penalty.

Paragraph 98. Civil penalties: Misdeclaration or neglect

This paragraph is based on existing provisions for other taxes and provides for a 5% penalty to be levied in instances where a return is made which understates a person's liability to levy or after 30 days a person who has received an insufficient assessment does not try and notify the Commissioners of that fact.

However, where a person who has underdeclared levy corrects the error in a manner prescribed in regulations, the penalty under this paragraph will not be applied.

The paragraph ensures that a person will not be liable to a penalty under this paragraph where in accordance with regulations the person provides full information about the error to the Commissioners at a time that the person has no reason to believe that the Commissioners are making enquiries into his affairs .

Furthermore, if the person satisfies the Commissioners or, on appeal, a Tribunal that there is a reasonable excuse for the error, a penalty will not stand, and in any event where a person is convicted of an offence or assessed with a penalty for evasion, a penalty under this paragraph will not arise.

Paragraph 99. Civil penalties: Incorrect notification etc.

This paragraph provides that where a user provides an incorrect notification or certificate to a supplier (regarding intermediate supplies, export, or claiming exclusion, exemption or liable to the half-rate of levy) which causes the supplier improperly to relieve (to any extent) the supply from the levy, then that user becomes liable to a penalty.

The penalty under this paragraph is the levy in question plus 5%. This accords with the penalty provided for in paragraph 98.

Paragraph 100. Interpretation of Part VIII

This provides an interpretation of some of the terms used with Part VIII.

PART IX. CIVIL PENALTIES: REDUCTION, ASSESSMENT, INTEREST AND UP-RATING.

Paragraph 101. Preliminary

This paragraph provides various definitions for the remainder of Part IX.

Paragraph 102. Reduction of penalties

This paragraph provides that the Commissioners or, on an appeal, an appeal tribunal, may reduce a civil penalty to any amount, including nil. However, where an appeal is heard relating to a penalty already reduced by the Commissioners, the tribunal may cancel all of or part of the Commissioners reduction.

The following must not be taken into account in determining whether a penalty should be reduced : insufficiency of funds; no significant loss of levy; the fact that the person was acting in good faith.

Paragraph 103. Matters not amounting to reasonable excuse

Where under a particular provision no liability to a civil penalty arises if someone demonstrates a reasonable excuse, insufficiency of funds and reliance on another person cannot be considered a reasonable excuse.

Paragraph 104. Assessments to penalties etc.

Where a person is liable to a penalty, this paragraph empowers the Commissioners to assess amounts of penalty due and if necessary make supplementary assessments where the original assessment was too low. The Commissioners may still assess for a penalty even if the conduct giving rise to the penalty has ceased. Once it has been assessed and notified to a person it shall be recoverable as levy due. However, interest cannot be payable on penalties except in accordance with this Part. Where someone is assessed to a penalty and also levy and or interest, then these assessments can be amalgamated into one assessment. However, the combined assessment must separately identify the penalty.

Paragraph 105. Further assessments to daily penalties

This paragraph refers to assessments to the civil penalty in Part XII for failure to provide information and failure to produce a document. Any assessment must contain a date to which the amount of the daily penalty is calculated. The rate of daily penalty is £20. Assessments may be made if further penalties accrue in respect of a continuing failure. Where the assessment to a civil penalty contains a date by which the failure has to be remedied, and this is done in time, then daily penalties cease to accrue beyond the date to which they have already been calculated.

Paragraph 106. Time limits on penalty assessments

This paragraph specifies the time limits for assessing penalties. An assessment to a penalty cannot be made more than three years after the conduct giving rise to the penalty. The exception to this rule is if levy has been lost as a result of conduct for which a person was convicted of a fraud offence or there has been evasion or a penalty for failure to notify. In these cases the time limit is extended to twenty years.

Certain time limits also apply on penalty assessments issued after the taxpayer's death.

Paragraph 107. Penalty interest on unpaid penalties

This paragraph makes provision for unpaid penalties to incur penalty interest for the period running from the date of notification of the assessment to the day before the assessed penalty is paid. If, when the Commissioners assess a penalty, they provide a date for payment and the trader pays in time, then that amount paid shall not be subject to penalty interest.

This paragraph describes that penalty interest is compound interest calculated at the penalty rate, and calculated on a daily basis but added to the principal once a month. The penalty rate is the ordinary interest rate under section 197 of the Finance Act 1996 plus 10 percentage points.

The Commissioners (or a Tribunal) may reduce the penalty interest incurred under this paragraph to any amount including nil. Furthermore where a person satisfies the Commissioners (or a Tribunal) that there is a reasonable excuse for the liability to pay penalty interest, this reasonable excuse may be taken into account in determining any reduction. The following are not considered a reasonable excuse -

(a) insufficiency of funds

(b) no significant loss of levy

Paragraph 108. Supplemental provisions about interest

This paragraph makes supplemental provisions about interest under 107 and provides that it shall be paid without any deduction of income tax. Where interest has been charged which turns out not to be due, the paragraph treats interest, in these cases, as never having been due and allows all reasonable adjustments to be made including those by way of repayment (subject to paragraphs 62 to 74).

Paragraph 109. Assessments to penalty interest on unpaid penalties

This paragraph provides for assessing the penalty interest incurred under paragraph 107. The Commissioners assess the amount and notify the person. The Commissioners may make supplementary assessments if the original one is too low.

Where an amount has been assessed and notified it shall be recoverable as if it were levy due. However, interest cannot be payable on interest except in so far as it is compounded in accordance with 107. The time limits on assessment to penalties also apply to the interest on penalties. Where someone is assessed to interest on a penalty and also levy, then the assessments can be amalgamated into one assessment.

However, the combined assessment must separately identify the interest.

Paragraph 110. Further assessments to interest on penalties

Notice of assessment to penalty interest on unpaid penalties must contain a date up to which the amount of interest is calculated. If interest continues to accrue, further assessments may be made. The Commissioners may also provide a date for payment on an assessment and if the interest is paid within that time no further interest accrues beyond the date specified.

Paragraph 111. Up-rating of amounts of penalties

This paragraph makes provision that the Treasury may by regulation alter the amount of a civil penalty to take into account changes in the value of money.

PART X - NON-RESIDENTS, GROUPS OF COMPANIES AND OTHER SPECIAL CASES

112 and 113 Non - resident taxpayers: appointment of tax representatives and Effect of appointment of tax representatives

These paragraphs provide that the Commissioners may make regulations regarding taxpayers who are resident overseas which secure that they appoint a person resident in the United Kingdom to act as their tax representative.

They set out certain things which may be contained within secondary legislation and establish a specific penalty of £10,000 if a taxpayer fails to request the Commissioners? approval for any person's appointment as his tax representative as required by the regulations, unless he has a reasonable excuse for failing to do so.

These paragraphs provide that the tax representative may be responsible for securing the non-resident taxpayer's compliance and ensuring that the non-resident taxpayer's obligations in respect of the levy are met. The paragraphs also provide that the tax representative will be jointly and severally liable for breaches.

Although the taxpayer will still be liable to register, the paragraphs provide that a tax representative shall not generally be liable to be registered for the purposes of the levy. They also provide for regulations to require that the name of a tax representative be shown in the register alongside the name of the registered taxpayer and make provision for the deletion of the name if that person ceases to be the taxpayer's representative.

The paragraphs also specify that the tax representative shall not be guilty of any offence unless he has been involved in the commission of an offence by the non-resident taxpayer he represents, or the offence committed was attributable to neglect on the part of the tax representative, or the tax representative contravenes any obligation the law imposes on both him and the non-resident taxpayer.

114 - Groups of companies, etc

This paragraph allows regulations to be made so that two or more companies etc. may be treated as a group for the purposes of the levy. It gives the Commissioners the power to make provision in secondary legislation about such issues as eligibility for group treatment, applications for and withdrawal from group treatment, and the members of a group liable for the levy. It also allows for a £250 penalty to be imposed if a company fails to notify the Commissioners of any matters relating to group treatment which they were required by secondary legislation to notify to the Commissioners.

115 - Partnerships and other unincorporated bodies

This paragraph empowers the Commissioners to make regulations determining who is to fulfil the tax obligations of businesses which are partnerships or other unincorporated bodies. It also makes specific provision for such businesses regarding matters such as who is accountable for the levy and the extent of certain persons? liability.

116 - Death and incapacity

This paragraph empowers the Commissioners to make regulations concerning the certain relevant requirements which must be fulfilled by a person carrying on the business of an individual who has died or become incapacitated.

117 - Transfer of a business as a going concern

This paragraph empowers the Commissioners to make various provisions by regulations in order to secure continuity when a business is transferred from one person to another as a going concern. Regulations may make particular provision for such things as notification to the Commissioners of a transfer, the transfer of obligations, the right to either a tax credit or repayment of levy and preservation of any relevant records or accounts relating to the business.

118 - Insolvency, etc

This paragraph allows the Commissioners to make various provisions by regulation for the application of the CCL rules in cases where an insolvency procedure is applied to a person or a deceased's estate.

PART XI REVIEW AND APPEAL

Paragraph 119 - Review of Commissioners? decisions

This paragraph provides for a right of review of various decisions by the Commissioners and the procedures which shall apply to the review process. It lists those matters in respect of which a review of any decision made by the Commissioners may be sought upon written request. These may include such things as whether the levy is payable, the amount of levy charged, the time the charge is taken as having arisen, registration and de-registration, a person's entitlement to a credit of tax and their liability to and amount of penalties or interest.

The paragraph provides that a written request for review of a decision must be made within 45 days of the decision being given, sets out when the Commissioners have a duty to undertake a review and allows them to withdraw, vary or confirm their decision. It also sets out under which circumstances a further review may be sought and provides that where the Commissioners do not formally respond within 45 days to a request to review a decision, that decision shall be taken to be confirmed.

Paragraph 120 - Appeals against reviewed decisions

This paragraph provides that an appeal may be made to an appeal tribunal in respect of decisions reviewed by the Commissioners (or so deemed) and sets out the conditions that must be fulfilled for an appeal to be entertained. In particular, before an appeal can be heard, it requires the appellant to have paid or deposited with the Commissioners any amount under appeal, although this requirement may be waived in cases of financial hardship.

Paragraph 121 - Determinations on appeal

This paragraph makes provision for supplementary matters relating to appeals. It sets out, for example, what may happen when a tribunal finds that the assessment should have been for a higher amount of tax, or they find that a liability to a penalty or amount of interest does arise. The paragraph also provides that where an appeals tribunal finds that an amount of tax paid or deposited in accordance with L2(2) is not due, that amount shall be repaid with interest at a rate set by the Tribunal.

This paragraph also provides that where an appeals tribunal finds an amount should have been repaid to a person in respect of a tax credit, it shall be paid with interest at a rate set by the Tribunal.

It also provides that when an appeal is heard without the amount of tax concerned being paid or deposited, and that amount is found to be due, the Tribunal may direct that it is paid with interest at a rate set by the Tribunal.

PART XII - INFORMATION AND EVIDENCE

Paragraph 122 - Provision of information

This paragraph requires those involved in any capacity with making or receiving supplies of taxable commodities or any connected activities to provide the Commissioners with any relevant information as may reasonably be required. The information must be provided in such form and within such a time as may reasonably be required by the Commissioners.

If a person fails to provide the required information in time, he shall be liable to a penalty of £250 and a further daily penalty of £20 until he provides the information. The paragraph also allows for these penalties to be waived in certain circumstances, such as in cases where there is a reasonable excuse for failing to provide the required information, or where a person is convicted of a relevant offence or is assessed for a penalty for evasion under paragraph 96 for failing to provide the required information.

Paragraph 123 - Records

This paragraph empowers the Commissioners to make regulations requiring registered persons (and those liable to be registered) to make and keep for up to six years such records as they may specify.

If a person fails to preserve any record in compliance with any regulations the Commissioners may make, he shall be liable to a penalty of £250. The paragraph also allows for this penalty to be waived in cases where that person has a reasonable excuse for failing to preserve a record , or where a person is convicted of a relevant offence or is assessed for a penalty for evasion under paragraph 96 for failing to preserve any record he is required to preserve.

Paragraph 124 - Evidence of records that are required to be preserved

This paragraph supplements 123 and contains provisions relating to evidence in civil and criminal proceedings, including the circumstances in which computer documents are admissible as evidence.

Paragraph 125 - Production of documents

This paragraph establishes the conditions under which the Commissioners may demand relevant documents to be produced to them. It provides that the documents should be produced at any reasonable time or place required by an authorised person.

If a person fails to produce the documents in time, he shall be liable to a penalty of £250 and a further daily penalty of £20 until he produces the document. The paragraph also allows for these penalties to be waived in certain circumstances, such as where there is a reasonable excuse for failure to produce a document, or where a person is convicted of a relevant offence or is assessed for a penalty for evasion under paragraph 96 for failing to provide the information required.

Paragraph 126 - Powers in relation to documents produced

This paragraph provides that an authorised person may take copies of, or extracts from, any document produced under paragraph 125. It also provides that an authorised person may, at a reasonable time and for a reasonable period, remove any document produced under paragraph 125 and in this event, the authorised person must, if asked, provide a receipt for that document. It also allows that where such a document is removed, a free copy of the document shall be provided to the person who produced if he reasonably requires it. The Commissioners are also required to provide certain compensation for any documents that may be lost or damaged after being removed.

Paragraph 127 - Entry and inspection

This paragraph provides a right of entry to, and inspection of, business premises by an authorised person in exercise of their powers in relation to the levy.

Paragraph 128 - Entry and search

This paragraph provides for obtaining a warrant for entry and search of premises by an authorised person investigating suspected, serious fraud offences. It sets out the powers of a person acting under the authority of the warrant, including the limitations of those powers, and provides that searches of persons may not be carried out by a member of the opposite sex. It also provides for a copy of the warrant to either be given to the occupier (or the person in charge of the premises) or to be left in any premises entered or searched if no such person was present.

Paragraph 129 - Order for access to recorded information, etc

This paragraph empowers a justice of the peace (or a justice in Scotland) to make an order in certain circumstances permitting an authorised person access to, and removal of, recorded information which may be required as evidence in relation to an offence in connection with the levy. It permits an authorised person access to, and permission to copy or take away any recorded information which he reasonably considers necessary. It also allows information stored on a computer to be produced in a visible and legible form which can be removed if required.

Paragraph 130 - Removal of documents, etc

This paragraph lays down certain provisions for investigation into fraud when documents are removed from premises under 128 or 129. It states that an authorised person who removes any documents shall on request provide a record of what has been removed. Also, subject to certain restrictions, it allows the person from whom documents were taken to have access to them and the right to copies of them.

Paragraph 131 - Enforcement of paragraph 130

This paragraph lays down procedures which allow specified people from whom documents, etc have been removed by Customs to enforce their rights of access to those items by means of an application to the court.

Paragraph 132 - Power to take samples and examine meters

This paragraph empowers an authorised person in certain circumstances to take samples from any material which he reasonably believes is a taxable commodity which is intended to be, is being, or has been the subject of a taxable supply, or is the product of the burning of a taxable commodity (other than electricity) which is being or has been the subject of a taxable supply. This is so that he may determine the correct liability of the supply.

The paragraph similarly allows the authorised person to examine any meter which he reasonably believes is intended to be, is being, or has been used for establishing the quantity of any taxable commodity supplied.

Similar provision is made in respect of material or equipment for the production of electricity.

Paragraph 133 - Evidence by certificate

This paragraph allows the Commissioners to provide evidence of certain facts by certificate. It covers matters such as whether a person was registered for the levy and whether or not a return has been made or levy due has been paid. It also provides that a photograph of a document certified by the Commissioners may be admissible in any proceedings to the same extent as the document itself.

Paragraph 134 - Inducements to provide information

This paragraph provides that statements or documents are not rendered inadmissible as evidence in criminal or recovery proceedings only because the person making or producing them was or may have been induced to do so by virtue of the Commissioners drawing attention to their power to impose a civil penalty rather than initiate criminal proceedings, the power to reduce a penalty and their practice to be influenced by co-operation and a confession of dishonesty. This provision is necessary to protect the admissibility of key evidence.

Paragraph 135 - Disclosure of information

This paragraph facilitates the disclosure of information between the Commissioners and other Government Departments and certain trade authorities, for the purpose of assisting them in their relevant duties, but establishes certain restrictions on the further disclosure of such information.

Paragraph 136 - Meaning of "authorised person"

This paragraph defines the reference throughout Part XII to "authorised person" as meaning any person acting under the authority of the Commissioners.

Part XIII. MISCELLANEOUS AND SUPPLEMENTARY

Paragraph 137. Security for levy

This paragraph provides that where the Commissioners think it necessary for the protection of the revenue, they may require a person who is, or is required to be registered to give security, or more security, for any payment of levy which is or may become due.

The Commissioners shall determine the manner and the amount of the security.

If a person who is required to provide a security does not comply, then they shall be guilty of an offence if they make a taxable supply, or if they arrange for a taxable supply for which they are required to account for levy.

The paragraph provides the maximum sentence for the offence.

This paragraph provides that sections 145 to 155 of the Customs and Excise Management Act 1979, which provide for general provisions as to legal proceedings, shall also apply in relation to an offence under this paragraph as they apply in relation to offences and penalties under the customs and excise Acts.

Paragraph 138. Destination of receipts

This paragraph provides for the treatment of all monies collected or received for on account of levy in Great Britain, and in Northern Ireland.

Paragraph 139. Provisional collection of levy

This paragraph deals with possible increases in the rate of climate change levy which only take effect under the Provisional Taxes Act 1968 until a lower rate is restored.

Paragraph 140. Adjustment of contracts

This paragraph provides that in certain circumstances contracts entered into before the introduction of CCL (or a change in rate or charge-ability) may be varied unilaterally in a way defined to take account of the levy (or the change).

Paragraph 141. Climate change levy accounting documents

This paragraph enables the Commissioners to make regulations regarding the provision and content of the climate change levy accounting document.

Paragraph 142. Service of notices etc.

This paragraph provides for how a relevant notice, notification, requirement or Commissioners? direction may be served, given or imposed.

Paragraph 143. Variation and withdrawal of directions etc.

This paragraph provides that any relevant direction, notice or notification required or authorised to be given by the Commissioners may be withdrawn or varied in the same manner in which it was given

Paragraph 144. Regulations and orders

This paragraph provides that any power under this Schedule to make regulations shall be done by statutory instrument.

This paragraph also provides that a statutory instrument under this Schedule made by either the Commissioners or the Secretary of State shall be subject to annulment by a resolution of the House of Commons (negative procedure).

Treasury regulations under specified provisions must be approved in draft by a resolution of the House of Commons (affirmative draft procedure).

The paragraph enables Commissioners? regulations to carry a penalty of £250, subject to certain restrictions.

The various powers to make regulations are more fully described in this paragraph.

PART XIV - INTERPRETATION

This Part deals with the interpretation of various expressions used in the climate change levy legislation.

SCHEDULE 7 - CLIMATE CHANGE LEVY - CONSEQUENTIAL AMENDMENTS

This Schedule makes a number of amendments to other enactments consequential on the climate change levy provisions.

Finance Bill 2000 index of clauses