Factsheet for combined heat and power stations
This factsheet applies only to combined heat and power (CHP)
stations that are assessed and certified under the CHP Quality
Assurance (CHPQA) programme administered on behalf of the Department
of Energy and Climate Change (DECC), and that are in possession of an
exemption certificate issued by DECC’s Secretary of State.
From 1 April 2013, the following changes come into effect:
- CHP schemes registered under the CHPQA programme with
electrical generating capacity of more than 2 megawatts (MWh) are
liable to account for the carbon price support (CPS) rates of CCL
on the proportion of supplies of solid fuels, natural gas and LPG
used to generate electricity
- CHP schemes registered under the CHPQA programme which claim
electricity generators’ relief are liable to account for the
CPS rates of fuel duty on the proportion of supplies of oil and
bioblend used to generate electricity
The proportion of fuel input that is used to generate electricity
will be calculated using the established boiler displacement method,
as set out below.
The CPS rates of CCL and fuel duty are as follows:
|
2013-14 |
2014-15 |
|
|
£ |
£ |
|
| Natural gas |
0.00091 |
0.00175 |
per kilowatt hour |
| Liquefied petroleum
gas |
0.01460 |
0.02822 |
per kilogram |
| Coal and other solid fossil
fuels |
0.44264 |
0.85489 |
per GJ of gross calorific
value |
| Fuel oil; other heavy oil;
rebated light oil |
0.01568 |
0.03011 |
per litre |
| Gas oil; rebated
bioblend |
0.01365 |
0.02642 |
per litre |
How to calculate the amount of CPS tax due on solid fuels,
natural gas and LPG used in a CHP
Deemed taxable supply
When a supply of a carbon price support rate commodity (coal or
other solid fuel, natural gas and LPG) is brought onto, or arrives at
a CHP station which is not a small generating station, the operator
of the station will be deemed to have made a supply to himself of the
quantity of the commodities that are referable to production of
electricity, and this quantity will become subject to the CPS rates
of CCL.
In the case of a CHP a small generating station is defined as one
in which the electrical generating capacity of the CHPQA scheme is at
or below 2MWh.
The operator of the station is the person who operates a CHP
station or who generates or produces electricity in that station.
If the operator of the station is not already registered with HMRC
for CCL purposes they will need to register to account for the CPS
rates of CCL before 1 May 2013 using form CCL1 ‘Registration
for Climate Change Levy’. Please refer to Notice CC1/1
Registering for Climate Change Levy.
What you need to do to calculate your liability
To calculate your liability you will need to refer to your current
CHPQA certificate. The date of issue will be 2012, or, when it
becomes available, the date of issue 2013. In the case of newly
registered scheme, or a scheme in respect of which changes have been
notified, you will need to refer to your interim certificate.
This certificate will show your Total Fuel Input (TFI), Qualifying
Fuel input (QFI) and Qualifying Heat Output (QHO).
For CHPQA certificates with a date of issue of 2013, the
proportion of fuel used to generate electricity will be shown on the
certificate expressed as a percentage.
Step 1: Calculate how much of the input
fuel is used to generate electricity:
Where TFI = Total Fuel Input for the station specified on the
current CHPQA certificate.
Where QHO = Qualifying Heat Output for the station specified on the
current CHPQA certificate.
Where Q = Total quantity of input fuels referable to the production
of electricity.
Step 2: Calculate the percentage of
input fuel used to generate electricity:
Where Q = Total quantity of input fuels referable to the
production of electricity.
Where TFI = Total Fuel Input for the station specified on the current
CHPQA certificate.
For certificates with a date of issue of 2013 this percentage will
be shown on the certificate.
Step 3: Calculate how much of the
taxable commodity is subject to the CPS:
Apply the percentage calculated to the quantity of each taxable
commodity for the purposes of CPS brought onto, or arriving at, the
CHPQA site1 on or after 1 April 2013. Then apply the
relevant rate to that amount of the commodity.
CCL, including the CPS rates of CCL, is declared on form CCL 100:
The Climate Change Levy return. This form must be submitted
periodically by registered persons as a declaration to us of the tax
due from them. Accounting periods are normally of three months’
duration though non-standard accounting periods can be requested.
1 A CHPQA site means the site of the scheme in
relation to which the station’s CHPQA certificate was
issued.
Review of the deemed supply
On receipt of the CHPQA certificate (with a date of issue of
2014), and following its submission to DECC for Secretary of State
certification purposes, you must review the correctness of the deemed
supply. This certificate will show the percentage of total fuels
referable to the production of electricity during that annual
operation. This percentage is then applied to the deemed supplies of
taxable commodities used in the CHP station on or after 1 April 2013
in order to calculate the amount on which the CPS rate is due, and
the CPS rate is applied to calculate liability.
In subsequent years, where the CPS rate increases in the course of
the calendar year, the liability should be calculated by applying to
each supply covered by the annual review the CPS rate applicable at
the time the supply took place.
When a review identifies a mismatch between the quantities of the
CPS rate commodities that were the subject of deemed supplies and the
quantities that should have been the subject of deemed supplies in a
review period, you must take one of the following actions:
- where the review determines that the amount of CCL declared at
the CPS rates was too little, you must declare and pay the
underpaid CPS rate of CCL to us by accounting for it on your next
CCL return
- where the review determines the amount of CCL declared at the
CPS rates was too much, you should offset the credit against the
total CCL due on your next CCL return
Where the actual quantities of the CPS rate commodities match the
amount of CCL paid at the CPS rates, no further action is required.
If you fail to carry out a review of the correctness of the quantity
of fossil fuels that is referable to the production of electricity in
a CHP station, you may be liable to a civil penalty (see Notice
CCL1/5 Climate change levy: penalties and interest).
Liability to main rates of CCL
Liability to the main rates of CCL in respect of input fuels used
by CHP stations remains unchanged from 1 April 2013; you will
continue to complete the supplier certificates PP10 and PP11. Please
refer to Notice CCL1/2 Combined heat and power schemes and Notice
CCL1/3 Reliefs and special treatments for taxable commodities.
How to calculate the amount of CPS tax due on oil and bioblend
used in a CHP
Reduction in relief
Fuel duty on oil and bioblend used in a CHP station to produce
good quality outputs may be reclaimed using form EX55. The claim is
in respect of the annual operation, and can therefore only be
submitted once the CHPQA certificate for that annual operation has
been received. The claim must be submitted within nine months of the
end of the annual operation. Please see Notice 175 Motor and heating
fuels: relief from excise duty on oils used to generate electricity
for details.
All CHP stations claiming relief must apply a reduction in the
amount of relief claimed in respect of the amount of CPS rates of
fuel duty due in respect of that annual operation.
You will need to refer to the CHPQA certificate with a date of
issue of 2013 for the percentage of total fuels referable to the
production of electricity. This percentage is then applied to the oil
or bioblend used in the CHP station on or after 1 April to calculate
the amount on which the relevant CPS rate of fuel duty is due, and
that rate is applied to calculate liability.
In subsequent years, where the CPS rates of fuel duty increase in
the course of the calendar year, the liability should be calculated
by applying to each use of fuel during the annual operation the CPS
rate of fuel duty applicable at the time the use took place.
Worked examples
Single Fuels
Example of how to calculate the amount
of CPS tax due in a CHP station where only one type of fuel is
used
A CHP station uses only natural gas. The current CHPQA certificate
shows:
TFI = 57160 MWh
QHO = 20650 MWh
Input fuels referable to the production of electricity =
| 57,160 - |
20650
81% |
=31,666 MWh |
Percentage of input fuels referable to the production of
electricity =
31666
57160 |
x 100 |
= 55.40% |
(This percentage will be given on the new CHPQA certificate issued
in 2013)
Across each accounting period the CHP operator will charge the CPS
rate of CCL on 55.40 per cent of the TFI to the site.
If in a three monthly accounting period the natural gas to the CHP
is 15,000,000 kilowatt hour (kWh), the amount subject to the CPS rate
of CCL will be 8,310,000 kWh (55.40 per cent of 15000000 kWh) .
8,310,000 kWh at £0.00175 per KWh equals £14,542.50
Refer to the CPS rates of CCL to apply the relevant rate to the
relevant amount of the commodity
Mixed fuels
Example of how to calculate the amount
of CPS tax due in a CHP station where the total fuel input is a
combination of mixed conventional fuels
A CHP station uses a combination of natural gas and gas oil. The
current CHPQA certificate shows:
TFI = 445101 MWh
QHO = 320588 MWh
Input fuels referable to the production of electricity =
| 445,101 - |
320588
81% |
= 49, 313 MWH |
Percentage of input fuels referable to the production of
electricity =
49,313
445101 |
x 100 |
= 11.08% |
Across each accounting period the CHP operator will charge the
relevant CPS rate on 11.08 per cent of the taxable commodities
supplied to the site.
If in a three monthly accounting period the natural gas to the CHP
is 103,809,000 kWh, the amount subject to the CPS rate of CCL will be
11,502,000 kWh (11.08 per cent of 103,809,000 kWh)
11,502,000 kWh at £0.00175 per KWh equals
£20,128.50.
For the gas oil the claim will be made on an annual basis. You
will need to refer to the CHPQA certificate (with a date of issue of
2013) for the percentage of total fuels referable to the production
of electricity. This percentage is then applied to the oil used in
the CHP from 1 April 2013 to calculate the amount on which the CPS
rate of fuel duty is due.
Example of how to calculate the CPS rate
of CCL against schemes using mixed conventional fuels and renewable
fuels
A CHP uses a mixture of coal, natural gas, biomass, and refuse
derived fuels.
The current CHPQA certificate shows:
TFI = 1,245,841 MWh
QHO = 56,907 MWh
Input fuels referable to the production of electricity =
| 1,245,841 - |
56907
81% |
= 1,175,585 MWh |
Percentage of input fuels referable to the production of
electricity =
1175585
1245841 |
x 100 |
= 94.36% |
Across each accounting period the CHP operator will charge the CPS
rate of CCL on 94.36 per cent of the TFI to the site.
If in a three monthly accounting period the coal to the CHP is
5,521 tonnes (T) the amount subject to the relevant CPS rate of CCL
will be 5,209 T (94.36 per cent of 5,521 T). The CHP operator will
need to calculate the gross calorific value of 5,209 T of coal to
apply the CPS rate of CCL.
5,209 T at £0.44264 per tonne equals £2,305.71.
If in a three monthly accounting period the natural gas to the CHP
is 20,922,000 kWh, the amount subject to the relevant CPS rate of CCL
will be 19,741,999 kWh (94.36 per cent of 20,922,000 kWh)
19,741,999 kWh at £0.00175 per KWh equals
£34,548.50.
The other fuels are not fossils fuels and not taxable commodities
for the purposes of the carbon price floor.
Refer to the CPS rates of CCL to apply the relevant rate to that
amount of the commodity.