How to be greener (and reduce your tax payments)

18th October 2021

By Kelly Mowatt, Tax Manager

At Wise & Co, we’ve been trying to be more ‘green’ in all areas of our business. Our latest news is that our website hosting is now run on 100% renewable electricity from sources like the sun, wind and sea.

Data centres in general use up a stack of energy, so we found a website host who strives to achieve carbon neutrality in its electrical energy usage and has sustainability as a central part of its operational approach. While you won’t notice any difference to our website you can be assured it’s being kinder to our planet!

How to reduce your tax payments

Here’s a reminder of some of the tax benefits to being environmentally friendly in various areas of business. These include:

The ECA (Enhanced Capital Allowance) scheme

The ECA enables some businesses to offset the costs of energy-saving technology equipment. You can claim ‘enhanced capital allowances’ (a type of first-year allowance) for:

This doesn’t usually apply where your business has bought items to lease to others or to use in a residence you are letting out. You can claim on your tax return. Read more on the government website about this here.

Temporary Super Deductions Allowance and Special Rate Allowance

On 3 March 2021 the Government announced in its spring Budget that it was introducing the new Super Deductions Allowance and Special Rate Allowance. These are temporary first-year allowances and enable businesses to reduce their tax payments in the tax year they buy qualifying equipment.

These allowances are not available to everyone – they apply to companies who pay corporation tax and not partnerships or LLPs, or individuals. They cover capital investments between 1 April 2021 and 31 March 2023 and only where the contract for the plant and machinery (including fixtures installed under a construction contract) was entered into after 3 March 2021 and expenditure is incurred after 1 April 2021.

So, between 1 April 2021 and 31 March 2023, these companies investing in qualifying new plant and machinery can claim:

  • a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances.
  • a first-year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances. This relief is not available for unincorporated businesses.

First year allowances for business cars (from April 2021)

In Budget 2020 the Government announced the extension of 100% first-year allowances for zero-emission cars, zero-emission goods vehicles and equipment for gas refuelling stations by four years from April 2021.

CO2 emission thresholds were also amended from April 2021. These determine the rate of capital allowances available through which the capital expenditure for business cars can be written down. The thresholds were reduced from 50g/km to 0g/km for the purpose of the first-year allowances for low CO2 emission cars.

Other tax reliefs and further support on ‘being green’

Other tax reliefs available include: less fuel duty on alternative fuels, tax and NIC breaks for ‘green’ travel arrangements, and reduced vehicle tax on vehicles with lower emissions. There are also opportunities to reduce certain insurance premiums.

In addition, further financial help for businesses is offered from several organisations if you’re considering purchasing new energy-efficient equipment, such as boilers, insulations and lighting.

These include The Carbon Trust, The Energy Saving Trust and WRAP.

While the tax reliefs are out there, they can be quite complex to apply. If you would like to do more to be ‘green’ and want to know about any of the above financial incentives, please contact us.

About the author

Kelly has over 20 years’ experience in professional practice and joined the firm’s Tax Department in March 2005. She is responsible for a broad spectrum of tax clients and can advise on all areas of tax payments.

Kelly Mowatt

TAX MANAGER

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