0800 140 4644
News stories of environmental disasters, demonstrations in central London and even the recent hot summer have made us aware of the importance of playing our part in protecting the environment. The good news is that your business may be eligible to benefit from tax relief by participating in schemes encouraging businesses to go green.
This will also be an interesting space in the upcoming election, with all of the key parties having policies in this area, so watch this space…
Saving on tax by saving the planet
The government has targeted some key areas to encourage businesses to protect the environment and, depending on the size and type of business you have, different tax relief will be available to you. Here are some key schemes that benefit many businesses:
Low emission and electric vehicles
Switching your company car to a low emission or electric vehicle can offer substantial tax savings:
- You can claim 100% of the first-year allowance for the full cost of purchasing a new low-emission car.
- The taxable benefit to an employee given a company car to use privately is lower for cars with lower carbon emissions.
- A low or zero emissions car entitles you to pay lower road tax.
- You may also be exempt from city centre congestion charges.
The government will continue to encourage businesses to make the switch to zero or low emission vehicles. From 2020, company car drivers who choose an emissions-free electric fleet model will pay no benefit-in-kind (BIK) tax for the year.
Enhanced Capital Allowances
This encourages businesses to invest in efficient technologies. To qualify for this tax relief, the energy efficient equipment, machinery or water-saving equipment must be new and included in the Energy Technology Criteria List. If the criteria are met, the scheme allows a business to claim 100% tax relief of the cost in the first year of purchase.
Climate change agreement
This scheme was implemented to encourage industrial, commercial and agricultural businesses and public service sectors to improve energy efficiency and use less energy to reduce the country’s CO2 emissions. Energy intensive businesses can volunteer to enter into a climate change agreement and benefit from a reduction in the Climate Change Levy rates, which can mean up to a 90% reduction for electricity and 65% for gas, LPG, coal and other solid fuels.
Research & Development
OK so it is a bit of a stretch as it is not specific to green initiatives, but R&D tax credits were established to drive innovation and recognise UK businesses that invest in research and development of new products, processes or services (or enhancing existing ones) allowing them to invest in further R&D and growth. If you are developing green products and services, this could well be a great way to help you fund your innovation and either claim:
- an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction; or
- claim a tax credit if the company is loss making, worth up to 14.5% of the surrenderable loss.
This could be a key lever for helping us hit the ambitious greenhouse gas targets we have.
Smaller-scale schemes
In addition to these schemes that consider larger scale changes there are also other, smaller schemes such as the Cycle to Work Scheme that encourage greener transport use with a tax benefit for the employee.
Seeking advice
With so many different schemes, and new Government directives being generated all the time, it’s always advisable to seek advice on which tax savings you may be eligible for whilst doing your bit to protect the plant.
If you would like further information about tax relief on environmental initiatives, our specialist team of business tax advisors are ready to help you, contact Black and White Chartered Certified Accountants today, or call us on 0800 140 4644.
