Environmental Tax reliefs: A guide for your businesses

Tax regulations around sustainability mean that business owners have a responsibility to maintain environmentally friendly business practices.

Understanding these regulations can keep your tax bill down and even provide tax relief in some circumstances.

Here is a quick guide to making the most of Environmental Tax reliefs.

Understanding Environmental Tax

Environmental taxes are designed to promote eco-friendly business activities by levying charges on pollution or the use of natural resources.

  • Climate Change Levy (CCL): The CCL is a tax on energy used by businesses, aimed at encouraging energy efficiency.
  • Aggregates Levy: If your business is involved in the production of commercial aggregates like sand, gravel, or rock, you’ll be subjected to the Aggregates Levy.
  • Landfill Tax: Businesses that dispose of waste in a landfill are required to pay Landfill Tax.

Green investment schemes

There are initiatives to financially support eco-friendly business improvements.

The Annual Investment Allowance (AIA) enables businesses to deduct the full value of qualifying green equipment from profits before tax.

Enhanced Capital Allowances (ECAs) are a similar option, offering a 100 per cent first-year allowance for investments in energy-saving equipment. So, buying environmentally friendly equipment can really pay off in the long run.

The benefits of electric vehicles

One of the many ways companies are looking to go green is by investment in electric vehicles.

Not only are electric vehicles good for the environment, but they are also good for your tax bill.

Because road tax is calculated based on emissions, electric vehicles are exempt from the charges associated with most other petrol or diesel vehicles.

A first-year capital allowance of 100 per cent of the cost can be claimed on all new and unused cars with zero emissions, while the purchase of second-hand vehicles can benefit from annual writing-down allowance of 18 per cent of the cost.

There are also lower rates of Benefit in Kind for employees, compared to petrol, hybrid or diesel cars, where vehicles are offered to them as a company car.

Therefore, swapping your company vehicles for electric ones can greatly reduce your yearly tax bill whilst simultaneously contributing to cleaner air.

Environmental Tax relief

Environmental taxes are not just a responsibility but an opportunity.

Specialist equipment designed for energy conservation may qualify for tax relief under the Environmentally Beneficial Plant and Machinery (EBPM) scheme.

This is yet another avenue through which businesses can recuperate costs while contributing positively to environmental sustainability.

You could also be eligible for CCL relief if you enter into a Climate Change Agreement (CCA) with the Environment Agency. CCAs are voluntary arrangements that set energy efficiency targets. Achieving these targets entitles you to a CCL discount.

By taking advantage of the reliefs and schemes available, you can significantly offset costs while making your business greener.

Navigating these complexities can be challenging, but a qualified accountant can guide you through Environmental Taxes and apply for relief on your behalf.

For assistance making the most financially sound and eco-friendly decisions for your business, get in touch.

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