Five tax benefits available to your business for going green

Being an eco-conscious, sustainable business is no longer about PR stunts. It’s about the commercial viability of your operation and ensuring your business continues to thrive. There are several tax incentives on offer to businesses owners that can give your firm financial aid to make it a greener going concern.

1. Electric vehicles will pay no benefit-in-kind tax from April 2020

Earlier this summer, the Treasury revealed that drivers of fully electric, zero-emissions company cars will pay no benefit-in-kind (BIK) tax for the 2020-21 tax year.

Small businesses that opt for fully electric vehicles will not pay a penny in company car tax for 2020-21, but this will rise to 1% for 2021-22 and 2% for 2022-23.

It’s hoped this initiative will encourage more small businesses to invest in electric vehicles (EVs) and reduce their carbon footprint of journeys to and from meetings, seminars, conferences and such like.

2. Vouchers available for the Electric Vehicle charging points

With six-in-ten new car registrations in the UK now thought to be fully electric vehicles, the need for increased vehicle charging points is becoming greater than ever.

The UK Government’s Office of Low Emission Vehicles (OLEV) has therefore introduced a tax incentive for small businesses to install their own EV charging points via the Workplace Charging Scheme.

This voucher-based scheme offers financial support towards the initial purchase and installation costs for electric vehicle charging points for staff by up to £10,000:

  • Businesses can claim support for up to 20 EV charging sockets, with £500 grants available per socket.

3. Take part in the Cycle to Work scheme

If you aren’t already, consider engaging your business in the Cycle to Work scheme. This 20-year-old scheme is an increasingly popular salary sacrifice scheme, allowing staff to have access to use road bikes from their employers, completely tax-free.

Not only can your employees benefit from having tax free access to a new road bike and subsequent accessories, employers can save on the Cycle to Work scheme too. It’s possible to claim for the full cost of the bike, as well as a saving of National Insurance Contributions (NICs) up to 13.8% of the bike’s value.

Aside from the tax benefits for you and your staff, engaging your employees in cycling to work can also help create a happier, healthier workforce and reduce the number of commuting cars on your local roads.

4. Claim enhanced capital allowances for energy efficient technologies

For small businesses planning on investing in energy-saving technologies, it’s possible to secure tax breaks for these investments via the UK government’s Enhanced Capital Allowance (ECA) scheme.

Under the ECA scheme it’s possible to claim 100% first-year allowances on investments in eligible technologies and products.

Put simply, you can write-off the entire first-year cost of the investment against your taxable profits of that year.

If the ECA scheme sounds of interest, make sure you seek advice on it soon as the scheme is due to come to an end on 1st April 2020.

5. Research & Development (R&D) tax reliefs for the development of greener products or services

Better still, if your business is investing in research and development to advance in science or technology in your particular field, you might be eligible for R&D tax relief or tax credits.

Small and medium-sized enterprise (SME) R&D tax relief is available to firms with fewer than 500 employees and a turnover of less than €100m or a balance sheet total of less than €86m.

SME R&D tax relief gives you the chance to deduct 130% extra of the qualifying R&D costs from your yearly profit, on top of the normal 100% deduction. This means that for every £1 you spend on R&D you could deduct £2.30 from taxable profits.

Alternatively, if your business is loss-making the R&D tax credit allows businesses to claim a repayable tax credit at 14.5%, which can help with cashflow during periods of investment.

The rules determining which projects can and cannot qualify for relief are complex and open to misinterpretation. You must also ensure the relief is claimed in the correct manner. If you’re unsure whether your business qualifies, don’t hesitate to contact us and we can put you firmly in the picture.

How we can help

If you would like more information about the tax benefits of reducing your business’ carbon footprint, call us on 0800 0523 555  to arrange a free, no obligation meeting to discuss the available options.

By Samantha Skyring FCCA
Last updated November 2019

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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