National Grid set to profit from Hunt’s full-expensing tax relief scheme
The National Grid has said that it expects increased earnings ahead of reporting its full-year results on 23 May due to a change in how it reports its financials brought on by the full-expensing tax relief scheme.
The energy company, which has faced questions about its ability to provide sufficient electricity to power the UK’s decarbonisation, said in a statement to markets that it would adjust how it reports its underlying earnings and earnings per share (EPS) due to the new policy.
National Grid said this move, which will boost the provider’s underlying EPS by eight per cent, would bring it in line with its peers and more accurately represent the business’s overall performance.
The full-expensing tax relief scheme was made permanent by Jeremy Hunt, the Chancellor, in November 2023. This scheme allows firms to fully deduct the cost of certain capital investments from their tax bill.
National Grid, which invests heavily in fixed assets such as pylons and transmission sites, stands to benefit particularly from the scheme.
However, the firm added that, in reality, its overall cash position remained similar due to the fact that the regulatory agreements it has in place provide a “revenue allowance to fund cash tax payable.”
This, the firm said, meant that despite the reduction in cash tax payable, the firm is operating a “broadly neutral cash position” with no economic effect because “any reduction in cash tax payable is matched by a reduction in the regulated revenues”.
At the end of last year National Grid laid out its plan to invest £42bn over the 2020/21 to 2025/26 period.
The company hiked its spending plans by £2bn over the period to meet the growing demand for green energy. The firm also started to push through a string of new reforms to ease the green energy gridlock.