Companies who adopt certain green practices could benefit from tax relief according to a top Birmingham employment tax specialist.
Ernst & Young employment tax director David Paul said although the increase in carbon emission reporting likely to arise from the Climate Change Bill will increase pressure on companies in the short term, there are tax advantages to going green.
By embracing practices like subsidised buses for employees, video conferences and carbon offsetting, companies could benefit from lower tax rates, he said.
Climate change and energy consumption have become an increasingly hot topic in the business world as employees and investors seek to understand how companies are managing their carbon footprints.
Although some sections of the West Midlands and UK businesses community already monitor their greenhouse emissions and have set reduction targets, it will soon become mandatory for all companies.
The Climate Change Bill – which was passed last week and commits Britain to reducing its greenhouse gas emissions by 80 per cent by 2050 – could result in major changes to the way some companies do business.
Mr Paul said: “The Climate Change Bill is likely to make it necessary for all businesses to reveal and account for their carbon emissions in their annual reports by as soon as 2012.
“Significantly, this won’t just include the carbon emissions resulting from the running of an office or a factory for example, but will also include employee travel – from business trips to the daily commute to work.”
Mr Paul said that the logistics of collating this information will inevitably add to the administrative burden on the West Midlands corporates.
“Collating carbon emissions data, particularly when looking at business travel, will be major challenge for many companies. The government still needs to establish how this reporting procedure would operate, but it is likely to add to the administrative demands on an already stretched business community.”
He added: “However, in the long run, regular reporting should make it easier for the West Midlands corporates to identify and devise strategies for reducing their energy consumption and carbon footprints.
“In most cases this is likely to result in cost savings for the employer and provide a boost to corporate reputation, increasing a competitive advantage.”
Mr Paul explained that by adopting certain green business practices, some companies would also benefit from tax relief.
“Corporates should be looking at these issues sooner rather than later as there are already a range of green initiatives available to businesses that will not only help to reduce a company’s carbon emissions but which also offer a competitive rate of tax.”
For example, by offering free or subsidised works buses, employers help to reduce car usage and also benefit from a tax exemption.
Mr Paul said: “We are also seeing a growing number of employers review their fleet policies, to ensure their cars and vans are as fuel efficient as possible.
“This has obvious environmental benefits but it is also important to remember that the more fuel efficient the vehicle, the lower the tax band.
“Introducing video conference calling, promoting car sharing and perhaps exploring tax efficient carbon offsetting as a way of dealing with international travel, may also help businesses to improve their green credentials,” he said.
“The green agenda is about more that just doing the right thing, it is set to become intrinsic to the way companies do business.”