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Energy Intensive Industries (EII) exemption relief scheme

With the spiralling costs of energy impacting the competitiveness of UK businesses, the government-backed scheme, that helps the Energy Intensive Industries compete with companies in countries with lower energy costs, has never been more important.

What is Energy Intensive Industries (EII) relief?

The UK government launched EII in 2016 to support businesses who require a high level of energy to manufacture their products. The relief is targeted at businesses that are put at a significant competitive disadvantage from the cost of funding renewable and low carbon policies.

Businesses that qualify can claim an exemption from the indirect costs of renewable policies with up to 85% off the costs of Contracts for Difference (CFD), Renewal Obligation (RO), or Feed-in Tariff (FiT).

Is my business eligible for EII relief?

There are five key requirements in determining whether a business is eligible for an EII certificate for an exemption from a proportion of the indirect costs of funding the CFD, RO, and FIT:

  1. Sector level test – the business must manufacture a product in the UK within an eligible sector
  2. Business level test – the business must pass a 20% electricity intensity test
  3. The business must not be an Ailing or Insolvent Economic Actor
  4. The business must have at least two quarters of financial data
  5. The business must show evidence of the last three months’ electricity consumption used to manufacture the products

How can Source Advisors help me apply for an EII exemption certificate?

A completed and evidenced application form needs to be sent directly to BEIS, the certification body.

Once a certificate is obtained it is passed to the energy provider who will automatically apply the exemptions. This means that your electricity is discounted at source and you don’t have to go through a reclaim process each year.

The certificate can then be renewed on an annual basis.

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In order to qualify for an EII exemption, your business will need to establish that they manufacture product(s) in the UK that falls within one or more of the eligible 4-digit NACE codes. Qualifying industries include steel and chemical production, and extractive industries. Also the manufacturing of a wide range of products, from meat processing to electric components.

If you do not manufacture a product in one of these sectors then you will not be eligible for an EII certificate. Businesses that produce both eligible and ineligible products can apply but the exemption will only be applied to the proportion of electricity used to produce the eligible product.

To satisfy the business level test, businesses will need to show that their electricity costs amount to 20% or more of their Gross Value Added (GVA) over a reference period – the “relevant period”. GVA is defined as earnings before taxes, interest, depreciation, and amortisation (EBITDA) excluding items which are extraordinary and all staff costs.
Business electricity consumption includes all electricity consumed by the business during the relevant period including grid and non-grid consumption.

Eligibility will be assessed using data based on the applicant’s financial year which has been submitted to Companies House, to allow verification. For businesses with three or more years of published annual accounts, the relevant period will be the three most recent consecutive years for which there are annual accounts. There are separate rules for companies with less than 3 years annual accounts.

Businesses will need to re-apply each time their EII certificate expires (which will generally be annually). However, a business can receive four more certificates after their initial application before their eligibility will be reassessed. Eligibility of businesses with less than three years of annual accounts will need to be reassessed before a new certificate can be issued.

Source Advisors will work with you to collate all the evidence that is needed including the “electricity cost impact calculation” which is vital to the overall process. We will liaise with all third parties so you can focus on the day job whilst we do the heavy lifting. As this is a specialised area and if you are approaching an application for the first time it can be useful to seek guidance. Given the complexity, you could fail to identify eligible costs which could reduce your potential savings, or even prevent a successful application to the scheme. Through our experience of dealing with R&D tax relief, we already capture energy costs for our manufacturing clients. Through our commercial understanding and accounting best practices we bring specialist resource and rigour to your application.

If you think your industry and business could be eligible for an EII exemption we will arrange a fact-finding meeting to help you decide your next steps.

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