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Eco-friendly tax relief – could you benefit?

by | Jul 26, 2021 | Tax compliance, Tax investigation, Tax planning

Eco-friendly tax relief – could you benefit?

Lorna Dias, Tax Manager at GKP, discusses enhanced capital allowances that could benefit your business.

Rummaging through the cupboards to eat ANYTHING to avoid a shopping trip and the washing machine idling as loungewear becomes a weekly uniform…the pandemic has, in addition to heartache and stress, brought about a little insight into greener living.

What about tax and being Eco-friendly? There are both carrot and stick approaches by HM Revenue & Customs but companies purchasing equipment have a new tax relief on the block of 130% (‘super deduction’) available on purchases of new plant and machinery that would otherwise fall in the main rate capital allowance pool. So, whilst you can get this additional relief on the standard stuff of ladders, drills, office chairs, desks, computer equipment and servers et al, what about the following?

Improving your own or employee’s lifestyle?

Purchasing bicycle’s to provide to employees (not necessarily for the commute) will gain the super deduction relief. No benefit in kind arises as the ‘Cycle to Work’ scheme permits an employer to loan/pool cycles and/or associated safety equipment to employees tax-free. If the employee wishes to purchase their own equipment, a tax-free loan can be given to employees instead and no capital allowance would be due.

Additional energy source requirements?

Solar panels and PVC cells for energy generation are the obvious solutions which will qualify for the higher reliefs available.

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Want to reduce energy bills?

Energy-efficient lighting and LED lamps are already cost-effective but the additional allowance makes it an easy way to save twice. Energy-saving boiler/heat exchanger could also be considered for more savings.

Reducing energy consumption and updating the kitchen canteen?

Consider low-energy refrigerators to get the extra relief.

This enhanced capital allowance availability lasts until 31 March 2023. As we all get back into the swing of things, if you are buying equipment, what’s not to like about multi-tasking to save tax and the environment.

What about cars?

The choice and price point for greener vehicles has expanded considerably since their introduction and whilst some Government approved vehicles can attract Grants of 35% (up to a maximum £2,500) which the dealer will directly deduct against the purchase price to avoid the need for any application forms, there are still opportunities to invest whilst incentives abound, as the following tax reliefs are available:

  • There is a 100% first-year allowance for new electric cars purchased by the business.
  • If you or your staff already have electric vehicles, then the installation of a workplace electricity charging station will qualify as a 100% deduction against profits under the First Year Allowances relief. Provision to the staff of this station will be a tax-free benefit in kind.
  • Reductions in Company car benefit and therefore the Class 1A National Insurance liability are available on Ultra-Low Emissions Vehicles (ULEV)
    • A zero-emission band – where company car benefit is only 1% of the list price in the current tax year and 2% for the next 3 years
    • Five new bands based on zero-emission miles (electric range between 30 to 150 miles) for ULEVs below 50g CO2per km.
    • Five bands for ULEVs between 51 and 75 CO2per km.
    • Four bands for ULEVs between 76 and 94 CO2per km.

Several Government approved vans also attract the 35% grant on the purchase (up to a maximum of £3,000 for small vans and £6,000 for large vans). This may be something to consider especially with the Ultra-Low Emission Charge Zones being rolled out nationally going forward.

So, if your business is in the process of opening up and you are looking to invest, could any of the above reliefs help you go down the green route? If so and you would like to discuss the idea further you can contact us for a free consultation.