Environmental tax reliefs: What are your options?

Environmental taxes aim to encourage businesses to operate in a more environmentally friendly manner, usually through penalising activities that cause pollution or drain natural resources. 

They include the Climate Change Levy (CCL), Aggregates Levy, and Landfill Tax.  

The CCL, for instance, is a tax on energy used by businesses – the Government is therefore incentivising you to focus on your energy efficiency.  

Similarly, the Aggregates Levy applies to businesses involved in producing commercial aggregates like sand, gravel, or rock, and the Landfill Tax is imposed on businesses disposing of waste in landfills. 

What are green investment schemes? 

To help offset environmental taxes the Government runs schemes that actively promote a more environmentally friendly business operation. 

To support eco-friendly business improvements, the Government offers initiatives like the Annual Investment Allowance (AIA), which allows businesses to deduct the full value of qualifying green equipment from profits before tax.  

Enhanced Capital Allowances (ECAs) also provide a 100 per cent first-year allowance for investments in energy-saving equipment.  

These incentives should encourage you to invest in environmentally friendly equipment, and, in fact, we often recommend that our clients look into these schemes. 

Should you invest in electric vehicles? 

We’ve had a lot of questions about electric vehicles recently, and clearly, they are becoming more and more popular. 

If you decide you’d like to go down that route, we fully support you – they are a great way to go green.  

They’re exempt from road tax, which is calculated based on emissions, so before you’ve even considered the long-term gain on fuel you are making a difference to your bottom line.  

You can also claim a first-year capital allowance of 100 per cent on the cost of new and unused cars with zero emissions.  

Additionally, lower rates of Benefit in Kind apply for electric vehicles provided as company cars, compared to petrol, hybrid, or diesel cars. 

Specialist equipment and energy conservation 

If you are investing in specialist equipment for energy conservation you may qualify for tax relief under schemes like the Environmentally Beneficial Plant and Machinery (EBPM).  

You could also be eligible for CCL relief by entering into a Climate Change Agreement (CCA) with the Environment Agency, which involves meeting specific energy efficiency targets. 

How to claim these tax reliefs 

While taking advantage of these reliefs and schemes can significantly offset costs and contribute to a greener business model, working out your liabilities, obligations and options for mitigation can be a real challenge.  

As such, we always advise that you seek guidance from qualified accountants to maximise the financial and eco-friendly benefits of these tax relief opportunities. 

We are happy to discuss your environmental relief options and any other tax mitigation strategies you’d like to explore. Please get in touch with one of our team for more information.