The Clean Heat Market Mechanism Regulations 2025

• (f) how payment of a financial penalty may be made;

• (g) information about rights of appeal.

• (5) The person to whom a penalty notice is given must pay any financial penalty set out in the notice to the person indicated in the notice on or before the due date.

• (6) A financial penalty, if unpaid, is recoverable by the administrator—

• (a) as a civil debt; or

• (b) on the order of a court, as if payable under a court order.

• (7) The administrator must pay any financial penalty received into the Consolidated Fund.

Waiver or modification of certain civil penalties

38

• (1) Except in the case of a penalty which must be imposed under regulation 41 (failure to notify fossil fuel boiler sales) or 45 (failure to make a payment), where the administrator considers appropriate, the administrator may—

• (a) waive a penalty;

• (b) allow additional time to pay a financial penalty;

• (c) impose a lower financial penalty or substitute a lower or higher financial penalty where one has already been imposed; or

• (d) modify the application of a publication penalty.

• (2) Where the administrator ceases to be satisfied that a person is liable for a penalty, or where there is an error in a penalty notice, the administrator may serve a further notice on that person to withdraw or correct the penalty notice.

Publication: general

39

Publication—

• (a) must not take place until the time to appeal against the penalty under Part 10 has expired and—

• (i) no appeal against the penalty has been made; or

• (ii) where an appeal against the penalty has been made, until after the final determination or withdrawal of the appeal; and

• (b) lasts for the period of one year beginning with the date on which publication takes place.

Failure to comply with the registration obligation in regulation 14

40

• (1) The penalties in paragraph (2) apply where—

• (a) an undertaking fails to comply with the registration obligation in regulation 14(1);

• (b) a group of undertakings fails to comply with the registration obligation in regulation 14(3); or

• (c) an undertaking or a group of undertakings fails to notify the administrator under regulation 14(7) of any changes to the information notified to the administrator pursuant to those obligations.

• (2) The penalties are—

• (a) the financial penalties of—

• (i) £5,000; and

• (ii) a daily penalty at a rate of £500 for each day that the undertaking or group of undertakings fails to comply with the obligation in regulation 14(1), (3) or (7), as the case may be, beginning with the day after the date on which the obligation should have been complied with, up to a maximum of £45,000; and

• (b) publication.

Failure to notify information under regulation 15 or 16 (fossil fuel boiler sales)

41

• (1) The penalties in paragraph (2) apply where a scheme participant or a near-threshold supplier fails to make a notification which it is required to make under regulation 15 or 16.

• (2) The penalties are—

• (a) the financial penalties of—

• (i) £50,000;

• (ii) a daily penalty at a rate of £500 for each day that the scheme participant or near-threshold supplier fails to make the notification under regulation 15 or 16, as the case may be, beginning with the day after the date on which the notification should have been made, up to a maximum of £45,000; and

• (b) publication.

Notification of inaccurate information under regulation 16 (annual notification of fossil fuel boiler sales)

42

• (1) The penalties in paragraph (2) apply where a scheme participant makes a notification which it is required to make under regulation 16 and the notification—

• (a) includes information which is inaccurate; but

• (b) does not fall within the description in regulation 47(1) (provision of false or misleading information).

• (2) The penalties are—

• (a) the financial penalty of £50,000; and

• (b) publication.

Failure to maintain records under regulation 18

43

• (1) The penalties in paragraph (2) apply where a scheme participant or a near-threshold supplier fails to maintain records as required by regulation 18.

• (2) The penalties are—

• (a) the financial penalty of £5,000; and

• (b) publication.

Failure to make a notification under regulation 21(3) or (4) (change of corporate structure)

44

• (1) The penalties in paragraph (2) apply where a scheme participant or a near-threshold supplier fails to make a notification which it is required to make under regulation 21(3) or (4).

• (2) The penalties are—

• (a) the financial penalties of—

• (i) £5,000; and

• (ii) a daily penalty at a rate of £500 for each day that the scheme participant or a near-threshold supplier fails to make the notification under regulation 21(3) or (4), as the case may be, beginning with the day after the date on which the notification should have been made, up to a maximum of £45,000; and

• (b) publication.

Failure to make a payment under regulation 28

45

• (1) The penalties in paragraph (2) apply where a scheme participant fails to make a payment which is due in accordance with regulation 28.

• (2) The penalties are—

• (a) a financial penalty equivalent to £4,000 in respect of each unit of the scheme participant’s low-carbon heat target which was unmet and in respect of which a payment was not made in accordance with regulation 28; and

• (b) publication.

Failure to comply with information notice

46

• (1) The penalties in paragraph (2) apply where a person fails to comply (or to comply on time) with the requirements of a notice (the “information notice”) given under regulation 32.

• (2) The penalties are—

• (a) the financial penalties of—

• (i) £5,000; and

• (ii) a daily penalty at a rate of £500 for each day that the person fails to comply with the requirements of the information notice, beginning with the day after the date by which the requirements of the information notice should have been complied with, up to a maximum of £45,000; and

• (b) publication.

Part 9 — Criminal penalties

Provision of false or misleading information

47

• (1) It is an offence for a scheme participant or a near-threshold supplier to make a notification which it is required to make under regulation 15 or 16 (notification of fossil fuel boiler sales)—

• (a) which includes information that the scheme participant or a near-threshold supplier knows to be false or misleading in a material particular; or

• (b) recklessly and which includes information which is false or misleading in a material particular.

• (2) A scheme participant or a near-threshold supplier guilty of an offence under paragraph (1) is liable—

• (a) on summary conviction in England and Wales, to a fine;

• (b) on summary conviction in Scotland or in Northern Ireland, to a fine not exceeding the statutory maximum;

• (c) on conviction on indictment, to a fine.

Obstructing power of entry etc.

48

• (1) It is an offence for a person—

• (a) to fail to comply with a requirement imposed pursuant to regulation 33(1);

• (b) to prevent any other person from—

• (i) appearing before the administrator or an authorised person; or

• (ii) answering a question to which the administrator or authorised person requires an answer;

when the person has been required to do so under regulation 33(1)(c); or

• (c) intentionally to obstruct the administrator, or an authorised person, in the exercise of a power referred to in regulation 33(1).

• (2) A person guilty of an offence under paragraph (1) is liable—

• (a) on summary conviction in England and Wales, to a fine;

• (b) on summary conviction in Scotland or in Northern Ireland, to a fine not exceeding the statutory maximum;

• (c) on conviction on indictment, to a fine.

Corporate liability

49

• (1) Where an offence under this Part is committed by a body corporate and—

• (a) it is committed with the consent or connivance of an officer; or

• (b) it is attributable to any neglect on the officer's part,

the officer as well as the body corporate is guilty of the offence and is liable to be proceeded against and punished accordingly.

• (2) An “officer”, in relation to a body corporate, means a director, manager, secretary or other similar officer of the body, or a person purporting to act in any such capacity.

• (3) If the affairs of a body corporate are managed by its members, paragraph (1) applies in relation to the acts or defaults of a member in connection with that member's functions of management as if the member were a director of the body corporate.

Scottish partnerships

50

• (1) Where an offence under this Part is committed by a Scottish partnership and—

• (a) it is committed with the consent or connivance of a partner; or

• (b) it is attributable to any neglect on the partner's part,

the partner as well as the partnership is guilty of the offence and is liable to be proceeded against and punished accordingly.

• (2) In paragraph (1) “partner” includes a person purporting to act as a partner.

Part 10 — Appeals

Decisions to which this Part applies

51

This Part applies to the following decisions of the administrator—

• (a) a determination that a member of a group of undertakings is the responsible undertaking under regulation 11(2)(b);

• (b) a determination of fossil fuel boiler sales under regulation 20(2)(a) or (7)(a);

• (c) a decision under regulation 28(2) to record in the registry the liability of a scheme participant to make a payment under regulation 28(1);

• (d) a decision to correct, or not to correct, the registry under regulation 29;

• (e) a decision to give a penalty notice under Part 8.

Right of appeal

52

A person who is aggrieved by a decision to which this Part applies may make an appeal to the First-tier Tribunal on the grounds—

• (a) that the decision was based on an error of fact;

• (b) that the decision was wrong in law;

• (c) in the case of a financial penalty, that the amount of the penalty is unreasonable;

• (d) in the case of publication, that the nature of the penalty is unreasonable; or

• (e) that the decision was wrong or unreasonable for any other reason.

Effect of appeal

53

• (1) Subject to paragraphs (2) and (3), the bringing of an appeal under regulation 52 suspends the effect of the decision pending the final determination or withdrawal of the appeal.

• (2) Where the appeal is against a decision of the administrator that a member of a group of undertakings is the responsible undertaking under regulation 11(2)(b), that decision remains in effect until the final determination or withdrawal of the appeal.

• (3) Where the appeal is against a decision of the administrator not to correct the registry under regulation 29, that decision remains in effect until the final determination or withdrawal of the appeal.

Determination of appeal

54

• (1) In determining an appeal under regulation 52, the First-tier Tribunal may—

• (a) affirm the decision;

• (b) quash the decision or vary any of its terms;

• (c) give directions as to the exercise of the administrator’s functions under these Regulations.

• (2) The First-tier Tribunal may not make a determination that would result in a decision which could not otherwise have been made under these Regulations.

Part 11 — Review

Review

55

• (1) The Secretary of State must from time to time—

• (a) carry out a review of the regulatory provision contained in these Regulations; and

• (b) publish a report setting out the conclusions of the review.

• (2) Section 30(4) of the Small Business, Enterprise and Employment Act 2015[^f00023] requires that a report published under this regulation must, in particular—

• (a) set out the objectives intended to be achieved by the regulatory provision contained in these Regulations;

• (b) assess the extent to which those objectives are achieved;

• (c) assess whether those objectives remain appropriate; and

• (d) if those objectives remain appropriate, assess the extent to which they could be achieved in another way which involves less onerous regulatory provision.

• (3) The report must be published before the end of the period of five years beginning with the date on which these Regulations come into force.

• (4) In this regulation, “regulatory provision” has the same meaning as in sections 28 to 32 of the Small Business, Enterprise and Employment Act 2015 (see section 32 of that Act).

Signed

Miatta Fahnbulleh — Parliamentary Under-Secretary of State — Department for Energy Security and Net Zero — 27th January 2025

Explanatory note

(This note is not part of the Regulations)

Explanatory Note

These Regulations are made under Chapter 1 of Part 4 of the Energy Act 2023 (c. 52) and establish a low-carbon heat scheme known as the Clean Heat Market Mechanism. The scheme operates during the period from 1st April 2025 to 31st March 2029, is divided into four “scheme years” and applies to the whole of the United Kingdom. Participants in the scheme (identified in regulation 9) are those undertakings, or groups of undertakings, which are the supplier (as defined in regulation 2(1)) of a number of fossil fuel boilers above the relevant threshold which are sold during a scheme year. Scheme participants have a low-carbon heat target for each scheme year. This target (regulation 12) is expressed in units and is based on the number of the scheme participant’s fossil fuel boiler sales on the UK market above the thresholds, unless the boiler is for export or for installation in a new build property. Participants must meet their low-carbon heat target by acquiring and surrendering to the scheme administrator (the Environment Agency) a number of certificates corresponding to the number of units in their target (regulation 25). There is provision for part of a low-carbon heat target to be carried forward to the following scheme year in regulation 27. A scheme participant which has insufficient certificates to meet its low-carbon heat target for a scheme year must make a payment to the scheme administrator in accordance with regulation 28.

A certificate, or half certificate, is acquired when an undertaking is the supplier of a stand-alone heat pump or hybrid heat pump (defined in regulations 2(1), 3 and 4) which is installed during a scheme year (regulation 13). Installations must be in accordance with regulation 5, which includes a requirement for information about them to be recorded on the register of a certification scheme approved by the Secretary of State under regulation 6. An undertaking which is not a scheme participant may also acquire certificates and is referred to as a certificate holder. Scheme participants and certificate holders may transfer certificates in accordance with regulation 24 and carry them over for use in subsequent scheme years, subject to limits (regulation 26).

Part 5 includes provisions concerning information. A potential scheme participant must register with the scheme administrator if its fossil fuel boiler sales during the period from 1st April 2024 to 31st March 2025 were above the limits in regulation 14, or later, if it reaches those limits later. Potential “near-threshold suppliers”, which do not have low-carbon heat targets but which have notification obligations under the Regulations, must also register if they meet the relevant sales thresholds. Scheme participants and near-threshold suppliers must make quarterly notifications to the scheme administrator in accordance with regulation 15, and scheme participants must make an annual report, accompanied by a verifier’s assurance report (regulation 16). This Part includes other obligations in relation to record keeping and notification of information, as well as a power for the scheme administrator to estimate fossil fuel boiler sales in certain circumstances (regulation 20).

Part 7 includes powers to enable the scheme administrator to monitor compliance with the Regulations. Part 8 includes a range of civil penalties that must or may be imposed in respect of specified breaches of the Regulations, and Part 9 includes two criminal offences relating to the provision of false or misleading information and obstructing a power of entry. Part 10 contains provision about appeals from decisions made by the scheme administrator to the First-tier Tribunal.

A full impact assessment of the effect that these Regulations will have on the costs of business, the voluntary sector and the public sector is available from the Department for Energy Security and Net Zero, 3 - 8 Whitehall Place, London SW1A 2HH, and is available alongside this instrument on www.legislation.gov.uk.

Footnotes

[^f00001]: 2023 c. 52.

[^f00002]: See section 331(3) of the Energy Act 2023 for the meaning of the affirmative procedure.

[^f00003]: 2006 c. 46.

[^f00004]: 1976 c. 76. See section 21 for the meaning of “natural gas”.

[^f00005]: BS 2869:2023: “Fuel oils. Agricultural, domestic, commercial and industrial fixed combustion applications”. Published by the British Standards Institution on 31st July 2023 (ISBN 978 0 539 23834 1). Copies can be obtained from the British Standards Institution at https://knowledge.bsigroup.com/products/fuel-oils-agricultural-domestic-commercial-and-industrial-fixed-combustion-applications-specification?version=standard and hard copies can be obtained from BSI Customer Services, 389 Chiswick High Road, London W4 4AL.

[^f00006]: See section 143(2) of the Energy Act 2023 for the meaning of “low-carbon heat scheme”.

[^f00007]: See section 143(4) of the Energy Act 2023 for the meaning of “fossil fuel”.

[^f00009]: See section 143(3) of the Energy Act 2023 for the meaning of “low-carbon heat target”.

[^f00010]: 1998 c. 42.

[^f00011]: 2006 c. 46. Section 382(3) was amended by S.I. 2015/980.

[^f00012]: Section 383(4) was amended by S.I. 2015/980.

[^f00013]: Section 383(6) was amended by S.I. 2019/685.

[^f00014]: Section 441 was amended by S.I. 2008/393 and 2012/2301 and by the Economic Crime and Transparency Act 2023 (c. 56), section 55, from a date to be appointed.

[^f00015]: This definition was amended by S.I. 2015/980.

[^f00016]: 2010 c. 4.

[^f00017]: International Standard on Assurance Engagements (ISAE) 3000 (Revised): Assurance Engagements other than Audits or Reviews of Historical Financial Information, published 9th December 2013. Copies are available at https://www.iaasb.org/publications/international-standard-assurance-engagements-isae-3000-revised-assurance-engagements-other-audits-or or in hard copy on request from the Department for Energy Security and Net Zero, 3 - 8 Whitehall Place, London, SW1A 2HH.

[^f00018]: 1978 c. 30.

[^f00019]: 1971 c. 80. See section 1 and Schedule 1, which was amended by section 1 of the St. Andrew's Day Bank Holiday (Scotland) Act 2007 (asp 2).

[^f00020]: 1911 c. 6. Section 5 was amended by the Criminal Justice Act 1948 (c. 58), section 1(2).

[^f00021]: 1995 c. 39. Section 44(2) was amended by the Criminal Justice and Licensing (Scotland) Act 2010 (2010 asp 13), section 200(2)(b).

[^f00022]: 1979 No. 1714 (N.I. 19).

[^f00023]: 2015 c. 26.

Editorial notes

[^key-72e5c66b26cfee0db22e07220ed6f499]: Reg. 9 in force at 1.4.2025, see reg. 1(1)

[^key-197151d44c1a62d414e76dbfb0d42fbd]: Reg. 1 in force at 1.4.2025, see reg. 1(1)

[^key-3eaa286e0bc18ca4790dc2f0a283eb74]: Reg. 2 in force at 1.4.2025, see reg. 1(1)

[^key-26e41fff4c150dfcfec9c3ce75424103]: Reg. 4 in force at 1.4.2025, see reg. 1(1)

[^key-9b558d67da0574c3bb2cd61eefb0ba2b]: Reg. 12 in force at 1.4.2025, see reg. 1(1)

[^key-e7cb9b3a00d34c30a74f1d2475e659e5]: Reg. 3 in force at 1.4.2025, see reg. 1(1)

[^key-61e67d31ba4e413a8e70f2353aaa2f44]: Reg. 5 in force at 1.4.2025, see reg. 1(1)

[^key-1bfae749b61f1d071f864cf05d3a1115]: Reg. 7 in force at 1.4.2025, see reg. 1(1)

[^key-1f16753146fe714c560db15abd8b7b19]: Reg. 8 in force at 1.4.2025, see reg. 1(1)

[^key-ccd453dab8fd80190fec0675b2877136]: Reg. 10 in force at 1.4.2025, see reg. 1(1)

[^key-c211d7356d7a5792cdf2724715c838a8]: Reg. 11 in force at 1.4.2025, see reg. 1(1)

[^key-26daa08f01c31c351ce1c4fede7de02c]: Reg. 13 in force at 1.4.2025, see reg. 1(1)

[^key-8a018a6f2537ff7cce7dc2297d8d019f]: Reg. 14 in force at 1.4.2025, see reg. 1(1)

[^key-8e4ccd4db01fe67393820420d87441d6]: Reg. 15 in force at 1.4.2025, see reg. 1(1)

[^key-714f66f39bcaff57189135d8cad87a5e]: Reg. 16 in force at 1.4.2025, see reg. 1(1)

[^key-e22cacc0d472b6280f806f854bca5c03]: Reg. 17 in force at 1.4.2025, see reg. 1(1)

[^key-d5cad6c9bd84c2dbf795ab428a23922a]: Reg. 18 in force at 1.4.2025, see reg. 1(1)

[^key-e14699740a27624b7aa0cb53e7de714f]: Reg. 19 in force at 1.4.2025, see reg. 1(1)

[^key-8643642416967f6573f078e0914bc73c]: Reg. 20 in force at 1.4.2025, see reg. 1(1)

[^key-5b3cb7d37cc2c42efcce84e1c4b200db]: Reg. 21 in force at 1.4.2025, see reg. 1(1)

[^key-c210bd0b0033de5c6c23a57e0b29b643]: Reg. 22 in force at 1.4.2025, see reg. 1(1)

[^key-0d19236542bbbc69c431d0b77057b416]: Reg. 23 in force at 1.4.2025, see reg. 1(1)

[^key-a32d43b89ca2cfefacb07ee79a8d83f2]: Reg. 24 in force at 1.4.2025, see reg. 1(1)

[^key-34e397a72860261362323e59a6109a11]: Reg. 25 in force at 1.4.2025, see reg. 1(1)

[^key-5e860b885fce86bc4670ae1ccdee3a01]: Reg. 26 in force at 1.4.2025, see reg. 1(1)

[^key-3c430051d2107c79f734f49add808042]: Reg. 27 in force at 1.4.2025, see reg. 1(1)

[^key-6d0bcccccfc249e6ed54a17376281012]: Reg. 28 in force at 1.4.2025, see reg. 1(1)

[^key-7b1e7a57d664e1d41fdc3a56f456cbd7]: Reg. 29 in force at 1.4.2025, see reg. 1(1)

[^key-17dce3f350347e84a85eccadb31c362d]: Reg. 30 in force at 1.4.2025, see reg. 1(1)

[^key-8583b532bea4e6773846d08fd935bf05]: Reg. 31 in force at 1.4.2025, see reg. 1(1)

[^key-659f088005366ad0d8876840b270d70c]: Reg. 32 in force at 1.4.2025, see reg. 1(1)

[^key-adf9ae4e1e26380d24c69451ab437a4c]: Reg. 33 in force at 1.4.2025, see reg. 1(1)

[^key-5c8d8de2e49ac14f5cf3023e956ff831]: Reg. 34 in force at 1.4.2025, see reg. 1(1)

[^key-20f895e145117e72f4552948d8134283]: Reg. 35 in force at 1.4.2025, see reg. 1(1)

[^key-ae8a1affed950e03378e08745b8cd314]: Reg. 36 in force at 1.4.2025, see reg. 1(1)

[^key-1a47c931491793654b0ee597da85ca86]: Reg. 37 in force at 1.4.2025, see reg. 1(1)

[^key-653867f602aea6b8453cf92c7f277b29]: Reg. 38 in force at 1.4.2025, see reg. 1(1)

[^key-fb167b4b41265b42e93c08bcb60f6765]: Reg. 39 in force at 1.4.2025, see reg. 1(1)

[^key-44fb0d71ba1f563648ea8833575b2eeb]: Reg. 40 in force at 1.4.2025, see reg. 1(1)

[^key-55e1b55c050a6f7578d359c99d510c1f]: Reg. 41 in force at 1.4.2025, see reg. 1(1)

[^key-594f755cec666ffa35f316bf32047914]: Reg. 42 in force at 1.4.2025, see reg. 1(1)

[^key-3ad5151452b94079f8979c4c54a45d71]: Reg. 43 in force at 1.4.2025, see reg. 1(1)

[^key-a403fb0bdf71e1d539cd7df56032f164]: Reg. 44 in force at 1.4.2025, see reg. 1(1)

[^key-4103967965343605dc08d0ce31bf861c]: Reg. 45 in force at 1.4.2025, see reg. 1(1)

[^key-8062e148e50e81ff78fa218bd970b812]: Reg. 46 in force at 1.4.2025, see reg. 1(1)

[^key-7dafc88d606651b1199b43049c7295d3]: Reg. 47 in force at 1.4.2025, see reg. 1(1)

[^key-6aa8889c5c2e643dc912be19c522cb9c]: Reg. 48 in force at 1.4.2025, see reg. 1(1)

[^key-28e26ff8125a50396705db94f0f45d99]: Reg. 49 in force at 1.4.2025, see reg. 1(1)

[^key-59d0e1bdb11849d617c6d5ea85ae7f19]: Reg. 50 in force at 1.4.2025, see reg. 1(1)

[^key-bc47be6b10e74e4eff25b5707722c099]: Reg. 51 in force at 1.4.2025, see reg. 1(1)

[^key-88b356efd13e517a5c5e02f3ba75b68e]: Reg. 52 in force at 1.4.2025, see reg. 1(1)

[^key-45500cc721725dddb1afc8e2017c912d]: Reg. 53 in force at 1.4.2025, see reg. 1(1)

[^key-9b035617346a3893d5dcf7eb9e9e38b3]: Reg. 54 in force at 1.4.2025, see reg. 1(1)

[^key-0cc1be92469f98b80467b805ea60f647]: Reg. 55 in force at 1.4.2025, see reg. 1(1)

[^key-a67f6f0a516e87c8ec5fdc0fb30f6dd3]: Words in reg. 2(1) substituted (12.12.2025) by The Clean Heat Market Mechanism (Amendment) Regulations 2025 (S.I. 2025/1208), regs. 2(1), 5

[^key-73371753be1a61b7750dd9ba8da8482e]: Word in reg. 4(1)(b) omitted (12.12.2025) by virtue of The Clean Heat Market Mechanism (Amendment) Regulations 2025 (S.I. 2025/1208), regs. 2(1), 6(a)

[^key-140fb6d57ae9f083d40cbcff95b1a52b]: Words in reg. 4(1)(b) substituted (12.12.2025) by The Clean Heat Market Mechanism (Amendment) Regulations 2025 (S.I. 2025/1208), regs. 2(1), 6(b)

[^key-dd43f5ee99e87f03191586f58a1e7626]: Reg. 6 substituted (12.12.2025) by The Clean Heat Market Mechanism (Amendment) Regulations 2025 (S.I. 2025/1208), regs. 2(1), 7

Certification scheme