Business Benefits – Tax Breaks

Tax breaks and loans for going green

As well as helping to save the environment and lower overheads, businesses that practice green policies may be eligible for certain tax breaks or a loan.

1. Are you eligible for an enhanced capital allowance?

If your company is investing in new plant and machinery, by choosing equipment that is energy efficient you can claim an enhanced capital allowance. An enhanced capital allowance (also called a 100% first-year allowance) allows you to obtain tax relief on the whole cost of the purchase in the tax year it was made, rather than over several years. They are also available for businesses that invest in water-saving equipment and in new cars with low carbon dioxide emissions (see checklist point number 2).

For more information on the Enhanced Capital Allowance and qualifying products, visit the ECA website for more information.

2. Is your company car green?

There are two ways cars with low carbon dioxide (CO2) emissions can save on tax. If you are buying a new company car with a CO2 emission of not more than 120gm per kilometre, you can claim a 100% first-year allowance for its cost. The taxable benefit to an employee, who is provided with a company car to use privately, will also be lower for cars with lower CO2 emissions.

For more information, visit the HM Revenue and Customs website.

On new cars purchased and existing cars owned, the lower the car’s CO2 emission rating, the less vehicle excise duty you pay. To see the rates of duty, visit the DVLA website.

3. Installing Double Glazing

HM Revenue and Customs now treat installing double-glazing as an allowable expenditure on repairs. Although not labeled as a tax break for going green, it does mean the entire cost of replacing single-glazed windows with double-glazing can be offset against your tax bill.

4. Have you signed up to a Climate Change Agreement?

If your business is energy-intensive, for example, printing or craft baking, you can receive an 80% reduction on the Climate Change Levy, a tax on non-domestic energy use, by signing a climate change agreement. In return for paying less tax, you agree to meet set energy efficiency targets. You join the scheme through your sector association, of which membership is not required, although some associations might charge an administration fee.

For more information, visit the Defra website.

5. Interest free loans of £5,000 to £100,000

SMEs can apply for interest-free loans of £5,000 to £100,000 from the Carbon Trust to replace or upgrade existing equipment and appliances with more energy-efficient versions or install energy-saving products such as insulation. The Carbon Trust is a government-funded independent company that helps businesses cut carbon emissions.

See the Carbon Trust website for more information.

But don’t forget that in order to benefit from tax relief, you need to be paying taxes. The higher your tax rate, the greater the tax saving. If you are a sole trader or partnership that has just started and you have yet to make a profit, you may wish to defer your purchase until you have profits to set the relief against. Seek advice if you think you may be affected.

What’s your business’s Carbon Footprint?

Use our unique Carbon Calculator to find out.

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