What tax relief is available to make your business more sustainable?

For businesses, ‘going green’ can make not only environmental sense, but financial sense as well. There are a number of tax breaks available to companies looking to make their office space more sustainable. This can be done by investing in more environmentally friendly equipment and the use of electric cars for their business.

Super-deduction

The new super-deduction capital allowances were introduced in the March budget and took effect from 1 April 2021. This means qualifying plant and machinery purchased for your business will earn you a deduction of 130% against taxable profits.

For example, if you buy machinery or equipment for £10,000 you will enjoy a deduction against taxable profits of £13,000. Note that this deduction is only available to companies, and not to individuals or partnerships.

This is an attractive allowance for businesses looking to reconfigure their work environment to find new ways of working post-COVID. The allowance will apply to things such as office equipment, furniture and IT equipment. In addition, it will cover heating, air conditioning and lighting systems.

This could also be an opportunity to move to more energy efficient equipment includes items such as solar panels. Furthermore, it will give people the ability to work remotely more effectively. This contributes to a reduction in commuting with its positive environmental impact.

Charging Points

Also qualifying for the super-deduction are charging points for electric cars. While the cars themselves do not qualify, there are still attractive allowances currently available.

If the business installs charging points at its premises, the employee can charge their car while at work. This in turn means the business pays for all their fuel. The benefit in kind for this is zero. Compare that to a business paying for its employees’ petrol or diesel, where the resulting tax charge is almost certainly greater than the cost of the worker buying their own fuel!

Electric Cars

If you buy a brand new zero emission electric car then 100% of the cost can be set against your taxable profits. Unlike the super-deduction, this applies to individuals and partnerships too, so you don’t have to be a limited company.

A company will save itself tax at the 19% rate of corporation tax. Individuals could save at their top rate of income tax. This could be 20%, 40% or even 45%. It should however be noted that this will be reduced unless the car is used only for business. Personal use is not included.

Electric cars of course do not come cheap. However prices are falling as they become more commonplace. They are a great option as company cars as the benefit in kind is extremely low at the moment, with the benefit being linked to emissions.

If you do decide on an electric vehicle, the car must be delivered before the year end. This will ensure that it qualifies for corporation tax relief in that year.

You can read more about Electric Vehicles in our information sheet:

Read our EV info sheet

Research and Development

Research & Development (R&D) tax relief should also be considered for companies investing in or developing green technology.

R&D tax relief is a government-backed corporation tax incentive, aimed at stimulating innovation and development in UK industries. What actually constitutes R&D is wide ranging. It includes the development or improvement of a product or process. But there must be a technological advancement and an attempt to resolve a technological uncertainty.

Is your business using green technology in a new or original way to make your company greener or more sustainable? If so, it is worth discussing with us whether you could claim R&D relief.

Businesses seeking to reduce their carbon footprint through improvement of processes to make them more energy efficient, or by reducing waste products or water consumption may qualify.

Help for businesses

If you’re looking for ways to monitor and improve your business’ carbon footprint, but don’t know where to start, these resources can help you start your journey:

• Clean Growth UK is an innovation network working to connect climate-conscious businesses with the resources they need to innovate and grow.
• SME Climate HUB aims to remove the obstacles SMEs face as they take climate action, whether curbing emissions in their own business or getting green solutions to market
• Carbon Trust is a partner for businesses and organisations around the world. Supporting them in realising plans for a sustainable, low carbon future.
• Greater South East Energy Hub works with public sector organisations and their stakeholders to support the development of local energy projects.

Adur & Worthing Council have also launched Sustainable AW to help the community, business partners and councils work together to create a more sustainable future for our region.

How we can help

While there is a limited number of specifically green tax reliefs available, the recently announced super-deductions and other incentives can be a great starting point for businesses.

For further advice on how to make best use of the reliefs available, please get in touch with our friendly tax team.