The government’s “green tax regime” could provide a welcome boost to the bottom line as well as benefiting the environment. David Jewkes, tax partner at leading mid-corporate adviser Grant Thornton breaks down the details.
* 100 per cent allowances for energy-saving plant
Qualifying expenditure will benefit from allowances of 100 per cent of the cost.
Energy-saving plant or machinery is specified by the Department of Environment, Food and Rural Affairs and is updated as technology develops and products are certified.
Examples include “energy saving” boilers, radiant and warm air heaters, compressed air equipment, solar thermal systems and heating, ventilation and air conditioning zone controls.
Following this year’s Spring Budget, the energy efficient scheme list will be revised to include uninterruptible power supplies, air to water heat pumps and close control air conditioning systems.
* 100 per cent allowances for environmentally beneficial plant and machinery
Environmentally beneficial plant and machinery relates to water technology and attracts similar allowances.
Qualifying technology and products include certain taps, toilets, flow controllers, leak detection, meters, efficient membrane filtration systems, vehicle wash waste reclaim units, efficient industrial cleaning equipment and rainwater harvesting equipment.
* 100 per cent allowances for energy service providers
Special rules have been introduced to enable energy service providers to claim allowances on certain assets used to deliver the energy management service, provided qualifying conditions are met. These include:
* The services provided amount to more than just leasing
* An election is made for the provider to claim the allowances
* The plant or machinery is on the Technology List or Product List
* The plant or machinery is not for use in a dwelling house
* The energy provider, or another person with whom it is connected, carries out all, or substantially all of the operation and maintenance of the plant and machinery
* 100 per cent allowance for business property renovation
People who own or lease a business property that has been vacant for one year or more in a designated disadvantaged area in the UK can claim a deduction for 100 per cent of their capital expenditure on the conversion or renovation of the property, in order to bring it back into business use.
Expenditure qualifies if incurred within the five years commencing on or after 11 April 2007.
The allowance is not available to businesses undertaking certain trades.
* 10 per cent allowances for thermal insulation
Expenditure needs to be incurred in respect of adding insulation to an existing building.
Thermal insulation is deemed to include roof lining, double-glazing, draught exclusion and cavity wall filling. This allowance is available for all commercial buildings but is not available on dwelling houses. Residential landlords may qualify for landlord’s energy savings allowances instead.
* 150 per cent relief for contaminated land remediation
Essentially for every £100 spent on qualifying contaminated land remediation, companies (but not unincorporated businesses) can claim a £150 deduction against taxable profits.
Land is considered contaminated if there are substances such as poison or pollutants in, on or under the land which cause, or may cause harm (or pollution to ‘controlled’ waters).
This has now been extended to include plants, so expenditure incurred removing Japanese Knotweed now qualifies. The naturally-occurring contaminants radon and arsenic will also qualify.
From 1 April 2009 specific expenditure on land derelict since 1 April 1998 and already derelict when acquired by the claimant will qualify.
* 100 per cent allowances on natural gas, biogas and hydrogen refuelling equipment
Qualifying expenditure includes storage tanks, compressors, controls and meters, gas connections and filling equipment. The expenditure must be on new and unused equipment incurred between 1 April 2008 and 31 March 2013 for biogas and 17 April 2002 to 31 March 2013 for natural gas and hydrogen equipment. Expenditure still qualifies if the refuelling station is on the company’s own premises, and is not open to the public.
* 100 per cent allowances on energy efficient carsExpenditure on an electric car or a car with low carbon dioxide (CO2) emissions between 17 April 2002 and 31 March 2013 would be eligible for the allowance.
* Payable tax credits available to companies
It is worth bearing in mind that companies can, if certain conditions are met, surrender tax-adjusted losses in return for cash payments.
The tax credits are only available if the losses are attributable to 100 per cent allowances on energy-saving plant, or environmentally beneficial plant and machinery or from a loss resulting from a contaminated land remediation claim.
The cash payment will be equal to 19 per cent of the loss surrendered in respect of the plant and machinery and 16 per cent of the loss surrendered in respect as a result of the contaminated land remediation claim.
* Reducing income tax and NIC on company cars
The lower a company car’s emissions, the smaller percentage used to calculate the taxable amount due. Therefore, if you provide your employees with a lower emissions car then they will benefit from higher net pay and you will benefit from lower NIC.
And finally, a tax charge to avoid:
* Landfill tax (LFT)
Landfill tax was introduced to encourage recycling or alternative disposal. The tax is actually paid by the landfill site operators who increase their tipping fees appropriately. As a waste producer, you should review the amount of tax being paid and the type of waste being produced.
If your waste is not being sorted correctly you could end up paying £40 per tonne from 1 April 2009 or £48 per tonne from 2010 if new legislation in The Finance Bill 2009 receives Royal Assent.