Our recent Law-Now on the Environment Agency’s Guidance on how to comply with the Energy Savings Opportunity Scheme (“ESOS”) (click here) indicated that the guidance was intended to clarify some aspects of the scheme. One aspect is the treatment of overseas undertakings under ESOS. The scope of those affected by ESOS may change as a result of the new guidance therefore those with such establishments should review whether they should be included in ESOS assessment.
It specifically impacts UK non-incorporated establishments of overseas parent organisations (the current advice relating to overseas companies who only have UK subsidiaries, as opposed to UK establishments, has not changed).
Previous guidance was that only UK registered incorporated undertakings were required to participate in ESOS. However, following clarification between the EA and DECC, the EA has clarified that ESOS also applies to overseas undertakings with non-incorporated UK establishments if they:
- have at least 250 UK employees (e.g. paying income tax in the UK); or
- are part of a global corporate group which has a large non-incorporated UK undertaking or UK establishment which meets the ESOS qualification criteria.
An 'establishment' is defined as a branch within the meaning of the Eleventh Company Law Directive (89/666/EEC) or a place of business that is not such a branch where there is some degree of physical presence in the UK.
Separately the EA has also confirmed the following:
- Where an overseas undertaking does not have any subsidiaries in the UK, but has a UK establishment registered at Companies House and has at least 250 staff in the UK paying UK taxes then the UK establishment will be required to participate in ESOS.
- Where an overseas undertaking does not have any subsidiaries in the UK, but has a UK establishment registered at Companies House and has less than 250 staff in the UK paying UK taxes then the UK establishment will not be required to participate in ESOS.
Where a global corporate group has UK subsidiaries but also UK establishments then the UK establishments will participate in ESOS if they or another subsidiary/establishment in the group meet the ESOS qualification criteria as set out in the ESOS guidance.
UK establishments will be treated in the same way as UK undertakings with one exception, namely: establishments will not be required to consider the turnover or balance sheet elements for the purpose of assessing qualification.
Pages 6-7 of the EA Guidance apply: [click here to view EA Guidance]