• Alongside well-publicised taxes imposed to discourage negative environmental behaviour, such as climate change levy, landfill tax and air passenger duty, there are a series of less well-publicised tax reliefs to encourage positive environmental behaviour. This presentation outlines some of those reliefs.
Thermal insulation of buildings
• Used in a trade or property letting business
• Not dwelling houses
• Treat expenditure as integral feature for capital allowances purpose
• 10% writing down allowance each year
• Look at this for past expenditure on industrial buildings (no more Industrial Buildings Allowances).
External solar shading
• Typically a brise soleil, an arrangement of louvres or fins to shade window openings
• Used to control solar heat gain, and thus limit or eliminate the need for air conditioning
• Expenditure is eligible for a 10% writing down allowance as an integral feature
Enhanced capital allowances
• 100% first year capital allowances, giving full tax relief in the year of purchase.
• Available in respect of “dedicated energy saving plant and machinery” and “environmentally beneficial plant and machinery”
• Eligible items are on one of four lists, maintained by the Carbon Trust on behalf of the Department for Environment, Food and Rural Affairs
Enhanced capital allowances – The Energy Technology Criteria and Product Lists
• These lists cover such items as:
o Air to air recovery technology
o Combined Heat and Power
o Radiant and warm air heating
o Solar thermal systems
• The lists are updated on a regular basis as technology develops.
Enhanced capital allowances – The Water Technology Criteria and Product Lists
• These lists cover items such as:
o Efficient taps, toilets and showers
o Leakage detection equipment
o Efficient industrial washing machines and cleaning equipment
o Vehicle wash waste reclaim units
• Again the lists are updated regularly as technology develops
Enhanced capital allowances – tax credits
• If a company cannot use capital allowances (because it is loss-making) it can surrender its expenditure eligible for E.C.A.s for a 19% cash tax credit.
• The tax credit is limited by reference to the company’s PAYE & national insurance liability for the accounting period, or £250,000 if greater.
Low carbon dioxide emission goods vehicles
• 100% first year capital allowance on new and used zero-emission goods vehicles
• Applies to vehicles which cannot produce carbon dioxide emissions when driven, and are designed mainly for the conveyance of ‘goods or burden’.
• Typically this applies at present to electric vehicles.
Electrically-propelled cars and very low emission vehicles
• 100% first year capital allowance
• Applies to new and unused vehicles
• Applies to vehicles with carbon dioxide emissions below 110 grams per kilometre
• Operates until April 2013
• There are many models of car which meet this emissions criterion
Cars with CO2 emissions not exceeding 160 grams per kilometre
• The general rule for capital allowances is that cars are placed in the pool of assets eligible for 10% annual writing down allowances.
• However, cars with CO2 emissions not exceeding 160 g/km are instead placed in the pool of assets eligible for 20% annual writing down allowances.
• In general car (and fuel) benefits for company cars vary from 15 to 35% of list price depending upon CO2 emissions. Currently the 15% level applies to cars emitting not more than 130 grams per kilometre, with 1% steps for each further 5 grams of emissions. There is a 3% supplement for diesel cars
• There is a 10% of list price benefit for cars with emissions not exceeding 120 grams per kilometre
• There are discounts for cars capable of using alternative fuels, as follows:
o Electricity – 3%
o Liquefied petroleum gas or E85 – 2% (and can use the emission figure relating to the alternative fuel if beneficial)
• There is a 0% benefit charge for cars which cannot produce CO2 emissions, and a 5% charge for cars emitting 75 grams per kilometre or less (there are to our knowledge no petrol or diesel cars currently commercially available with emissions below 88 grams per kilometre, however)
Cycle to work scheme
• There is no taxable benefit-in-kind where an employer provides an employee with a bicycle or cycle safety equipment, provided the facility is generally available to employees and the employee uses the cycle mainly for home to work or work travel.
• There is no requirement for employers to monitor the use of cycles by employees in this respect.
• The provision of cycle parking at work and of free ‘cyclist’s breakfasts’ at work is also not taxable.
• 150% corporation tax deduction for the costs to a company of remediating contaminated land
• The land must be in the UK
• It must have been contaminated prior to acquisition, and not by the taxpayer
• Relief for employee, subcontractor and materials costs
• Relief available for asbestos removal costs
Landlord’s Energy Saving Allowance (“LESA”)
• 100% allowance for expenditure on energy-saving items in a UK property business, covering:
o Cavity wall, loft, hot water system and floor insulation
o Draught proofing
• Maximum LESA is £1,500 per property
• Applies only to residential property (not new property, furnished holiday lettings or property eligible for rent-a-room relief)
VAT on installation of energy-saving materials
• The 5% reduced VAT rate applies to the installation of such materials in residential property, including:
o Insulation material
o Central heating controls
o Solar panels
o Wind and water turbines
o Ground source heat pumps
o Biomass boilers
Stamp duty land tax on carbon neutral homes
• SDLT exemption for sales below £500,000
• For sales above £500,000, SDLT capped at £15,000.
• The house builder will provide a certificate to the homebuyer.
• Must demonstrate zero net carbon emissions for all energy use over a year
• Requires a high level of insulation and the provision of on-site renewable heat and power
Summary and Conclusion
• Not yet a comprehensive environmental tax code
• Many valuable reliefs available
• Expect a great deal more legislation in this area
• Expect the tax system to move towards an environmental basis from an income basis within the next generation
• If you would like to discuss your entitlement to ‘green’ tax reliefs, or to plan your future strategy to make your business eligible for them, please contact Mark Simpson:
• Telephone 0161 886 8062
• E-mail email@example.com