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The electricity generator levy: an introduction

Hiral Bhatt (Alvarez & Marsal) examines how the new levy will work and uncovers some uncertainties yet to be resolved.  

A new electricity generator levy is aimed at tackling the exceptional revenues being realised in the electricity market by electricity generators who do not have the same substantial increase in costs (i.e. do not produce electricity via gas). This includes those generating electricity from nuclear and renewable sources. The levy will not apply to electricity generation subject to a contract for difference with the Low Carbon Contracts Company Ltd or electricity generated outside of the UK.

While there appears to be a fair degree of comfort on the part of HM Treasury and HMRC on the clarity of the provisions governing the levy in Finance (No. 2) Bill 2022/23 some uncertainties remain which may cause confusion going forwards to those parties within the scope of the levy.

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