Nothing doing

Stamp duty exemption on new, zero-carbon homes kicked in on 1 October. It’s supposed to help deliver the government’s target for all new homes to be zero-carbon by 2016. The exemption applies to the first sale of homes worth up to £500,000 and runs until 2012.

Let’s hope they’ve made it workable before then, because at the moment it’s not. That’s a shame because the exemption, announced in this year’s Budget, was the first major financial incentive for energy efficient, low carbon homes. A Budget note (BN26) outlined how it would operate, and most observers agreed the proposals were sensible. The sting in the tail was the news that a statutory instrument (SI) would provide further definitions.

This was published in mid-June and consultation on it closed at the end of July. Far from clarifying how the tax exemption would work, this led to accusations that the rules would be impossible for any developer to comply with.

The consultation wasn’t helped by very poor drafting with errors such as the misuse of units “watts per square metre by Kelvin”, rather than Watts per square metre per degree Kelvin. However, these issues are minor given that the draft SI contained rules and definitions very different from the challenging but generally workable proposals in the Budget. This is exacerbated by inconsistency between the definition of zero-carbon suggested by HM Revenue & Customs, and that adopted by the DCLG in the Code for Sustainable Homes (CSH), Level 6.

What worries respondees is a requirement that the “energy supplied to the dwelling is produced from renewable energy sources solely”. Bizarrely, the SI suggests no grid connection would be allowed and implies on-site energy storage (with all its costs and complexity). The absence of a grid connection seems extraordinary, with no provision to export electricity at times of low on-site demand.

Many renewable technologies generate electricity intermittently. With no grid connection (hence no import/export capability), the dwelling would need significant battery provision to store energy in times of over-production to draw from in times of under-production.

The generation and storage capacity (and inverter) would have to be big enough to meet the peak demand. Excess energy generated at other times could used to charge the battery store, but if this is full, it would be wasted. This is in marked contrast with the definition of net zero carbon suggested by the Code for Sustainable Homes and proposed in the Budget, where the renewable installation capacity for a single dwelling would be less, but the overall useful renewable energy generated is likely to be greater.

Bizarrely, in its definition of eligible microgeneration technologies, the draft SI makes specific mention of air source heat pumps but fails to identify other relevant technologies. A literal reading suggests that wind, biofuels and ground source heat pumps are not acceptable as they are not "equipment, plant and apparatus or appliances", but sources.

Finally, and of most concern, is the lack of clarity on the use of electricity generated off-site from certified additional renewable sources to provide power for appliances. This option was (very sensibly) proposed in the Budget, but has not been included in the draft SI. The cost of generating all household energy requirements on-site (including appliance power) will nullify the attraction of stamp duty tax relief because the cost of meeting the requirements would be prohibitive.

The political rhetoric associated with zero-carbon homes is in danger of being undermined by HM Revenue & Customs definitions and rules which make their achievement technically impractical and unaffordable. Cynics will say this is what HMRC and Gordon Brown are aiming for: zero carbon = zero stamp duty = zero claims for relief!