24 April 2014 
Harriet Latham, Tax Manager
KPMG has produced a report on income arising from Green Energy schemes for BUFDG and this is now available on the Documents area of the website. The report considers how HEIs would account for income arising from Energy Company Obligations Income (ECO), Feed in Tariff income (FiT), and Carbon Credit Trading.
KPMG has concluded that ECO income is most likely to be taxable as a capital contribution towards an asset and so is not subject to tax if received in the university. FiT income and Carbon Credit Trading Receipts are most likely to be taxable as Non-Primary Purpose trading income.
You should note that this advice differs from the position put forward by HMRC to BUFDG – where HMRC stated that the income would be taxable as miscellaneous income in the university – this income is not subject to a charitable relief, and so the gross income could be subject to corporation tax if received in the university. KPMG believes that HMRC has [incorrectly] based their conclusions on the position for housing associations – which are in fact quite different from HEIs, because housing associations are taxed as investment companies – and so it is quite feasible that this income should be taxable as miscellaneous income. However HMRC has accepted that HEIs are taxed as trading companies for quite some time, and so the most likely conclusion is that this income should be taxable as non-primary purpose trading income.
However, because of this difference of opinion, and the amounts at stake for some HEIs, BUFDG has written to HMRC to seek a formal ruling on this question – hopefully this will be available before the year end. In the meantime, if you are considering entering into any new ventures, you may wish to consider routing the income through a subsidiary company in order to achieve the most secure position. If you have received such income in your HEI in the current period or preceding 4 years, then you may wish to consider whether this income gives rise to a corporation tax liability if taxed as non-primary purpose income. If you do discover that your HEI does have a corporation tax liability then you should submit a[n] [amended] tax return accordingly.
