Environmental guidance for your business in Northern Ireland & Scotland

Environmental tax obligations and breaks

It's worth finding out if your business can benefit from any environmental tax measures. If you invest in environmentally friendly equipment, you could receive tax breaks. Energy-efficient machinery, for example, qualifies for a 100 per cent tax allowance in the first year you buy it. This allows businesses to offset the costs against taxable profits.

This guide provides information on how environmental taxes are levied, who collects them and who pays them. It also includes information on exclusions, exemptions and tax credits.

Additional resources

   

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HMRC: Environmental taxes

Climate change levy (CCL) is designed to encourage businesses to reduce their energy consumption or use energy from renewable sources.

Generate your own renewable energy

Your business can also reduce costs through minimising your energy use.

Energy efficiency

The CCL applies to supplies of the following:

  • electricity
  • natural gas supplied by a gas utility
  • petroleum and hydrocarbon gas in a liquid state (LPG)
  • solid fuels, ie coal, lignite, coke - and semi-coke - of coal or lignite, and petroleum coke.

Users of energy from these sources must pay the tax. The levy is imposed at the time of supply, so it will already be included in your energy bills. Suppliers of these services collect the tax. Note that supplies for domestic use and to charity users for non-business purposes are excluded. Small quantities of fuel and power (de minimis) can be treated as being domestic use even when they are supplied to a business.

GOV.UK: Climate Change Levy

Rates

The levy is charged at an exact rate per unit of energy. The rates for 1 April 2013 are as follows:

Commodity

Rate from 1 April 2016

Rate from 1 April 2017

Rate from 1 April 2018

Rate from 1 April 2019 

Reduced rate of CCL for CCA holders

Electricity 0.559 pence per kilowatt hour  0.568 pence per kilowatt hour 0.583 pence per kilowatt hour 0.847 pence per kilowatt hour 10% (7% after 2019)
Gas supplied by a gas utility or any gas supplied in a gaseous state that is of a kind supplied by a gas utility. 0.195 pence per kilowatt hour 0.198 pence per kilowatt hour 0.203 pence per kilowatt hour  0.339 pence per kilowatt hour 35%(22% after 2019)
Any petroleum gas, or other gaseous hydrocarbon, supplied in a liquid state. LPG 1.251 pence per kilogram  1.272 pence per kilogram 1.304pence per kilogram  2.175 pence per kilogram 35%(22% after 2019)
Any other taxable commodity. 1.526 pence per kilogram 1.551 pence per kilogram    1.591  pence per kilogram 2.653 pence per kilogram 35%(22% after 2019)

 

Reduced rates and exemptions

CCL has a reduced rate and a range of exemptions.

If your type of business is deemed as energy intensive - such as aluminium, chemicals and food - the reduced rate could apply and you may get a 90 per cent reduction if you join an agreement to meet energy-efficiency or carbon-saving targets negotiated by your trade body and the government. To qualify, you must meet binding targets - reviewed every two years - for reducing energy use.

To check whether your business is eligible and how to join a scheme, see the page in this guideline: Climate change agreements.

The following are exempt from the levy:

  • supplies not for burning or consuming in the UK
  • supplies to and from certain combined heat and power schemes
  • electricity from renewable sources
  • supplies used to produce taxable commodities other than electricity
  • supplies to electricity producers
  • supplies for a non-fuel use.

GOV.UK: Climate Change Levy

Eligible industries can enter into climate change agreements (CCAs) with the Department of Energy and Climate Change (DECC). To be eligible for these agreements an industry should either operate activities listed in the Pollution Prevention and Control (PPC) Regulations or be classed as an energy intensive industry, meeting specific energy intensity criteria.

GOV.UK: CCA Eligibility details

This is a voluntary scheme where eligible industries that meet challenging energy efficiency or emission reduction targets benefit from a discount from the climate change levy of 90 per cent for electricity use and 65 per cent for other fuels . CCAs have a two-tier structure, with agreements established with business sectors (umbrella agreements) and with individual businesses (underlying agreements). Each agreement sets out targets, defines the obligations of all parties to the agreements and the necessary administrative procedures. Targets are negotiated between sector associations and government but it is the responsibility of sector associations to distribute the agreed target amongst their members.

GOV.UK:  How to set up and operate a CCA

The scheme currently has 51 participating business sectors, including sectors such as steel, chemicals, paper, cement, food and drink, pigs and poultry.

GOV.UK: List of Sector Associations

The current CCA scheme started on 1 April 2013. In the 2011 Budget it was announced that the scheme will continue until 2023 and that the existing 51 sectors will continue to be eligible for the CCA scheme and climate change levy discount. It was also announced that the climate change levy discount on electricity for CCA participants would increase to 90 per cent from April 2013.

This extension will provide businesses with more certainty to invest in energy efficiency measures with longer payback periods.

You can claim an enhanced capital allowance (ECA) of 100 per cent of the cost of certain types of equipment in the year that you buy them. These are also known as first-year allowances.

These designated types of equipment are:

  • water-saving plant and machinery
  • energy-saving plant and machinery
  • low carbon-dioxide emission cars
  • natural gas and hydrogen refuelling infrastructure.

You can write off the whole cost of qualifying equipment against your taxable profits in the period during which you make the investment, thus improving cashflow.

Water efficient equipment

First-year allowances are available for expenditure on plant and machinery that is designed to improve water quality or reduce water use. :Example include:

  • water-efficient showers and taps
  • vehicle-wash water reclaim units.

Plant and machinery that qualifies must be included as a qualifying technology or product specified in a Technology List or a Product List issued by the Secretary of State for the Department for Environment, Food and Rural Affairs.

You can't usually claim this allowance for equipment that you buy for leasing out.

Defra provides more information about what equipment qualifies.

Department for Environment, Food and Rural Affairs (Defra): Search for water efficient technologies

If your business or organisation is liable to Corporation Tax, there are also some special rules that may allow you to surrender losses you make that are attributable to investments in qualifying equipment in return for a cash payment called a first-year tax credit. It is the making of the claim that creates the loss and it is only the loss attributable to the capital allowance claim for these assets that is relevant for the first-year tax credits.

HMRC: First year tax credits

Energy-saving equipment

First-year allowances are also available for expenditure on energy-saving equipment for example:

  • high-efficiency lighting units
  • solar thermal systems.

To qualify for a first year allowance the equipment must be included as a qualifying technology or product specified in a Technology List or a Product List issued by the Secretary of State for the Department of Energy and Climate Change.

You can't usually claim this allowance for equipment that you buy for leasing out.

GOV.UK: The Energy technology products list

HMRC: First year allowances for energy saving products

If your business or organisation is liable to Corporation Tax, there are also some special rules that may allow you to surrender losses you make that are attributable to investments in qualifying equipment in return for a cash payment called a first-year tax credit. It is the making of the claim that creates the loss and it is only the loss attributable to the capital allowance claim for these assets that is relevant for the first-year tax credits.

HMRC: First year tax credits

Low CO2 emission cars

First-year allowances are available for expenditure on a new electric car, or a new, unused car with CO2 emissions of not more than 110gm per km driven, for expenditure incurred before  31 March 2013, or 65 gm per km for vehicles purchased after April 2013.

HMRC: Capital allowances on Plant and Machinery

GOV.UK: Car fuel data, CO2 and vehicle tax tools

If you purchase an ultra-low emission vehicle you can claim a Plug in Grant of 25 per cent of the cost of the vehicle up to a maximum of £5,000. You can find a list of qualifying cars on the GOV.UK website.

GOV.UK: Plug-in car grant 

Zero emission goods vehicles

First-year allowances are available up to 31 March 2015 for expenditure on a new and unused goods vehicle with zero emissions. However, there are certain restrictions. If you are intending to acquire a zero emission goods vehicle, please contact the HMRC Capital Allowances Helpline on Tel 020 7147 2610. This is an answerphone with a call-back service.

Vehicle gas refuelling equipment

Until 31 March 2013, 100 per cent first-year allowances are available for expenditure on new plant and machinery installed to refuel vehicles with:

  • natural gas
  • hydrogen
  • biogas.

Eligible equipment can include:

  • storage tanks
  • compressors
  • controls and meters
  • gas connections
  • filling equipment.

The refuelling station does not need to be open to the public or used for cars. For example, an operator of a fleet of commercial vehicles may install a gas refuelling station on its premises to refuel its vehicles.

HMRC: Natural gas and hydrogen gas refueling equipment

You can't usually claim this allowance for equipment that you buy for leasing out.

Northern Ireland landfill tax

Landfill tax is paid on top of normal landfill fees by businesses and local authorities that want to dispose of waste using a landfill site. It is designed to encourage businesses to produce less waste and to use alternative forms of waste management.

VAT should be charged on the full waste disposal fee, inclusive of the landfill tax.

There are two rates of tax from 1 April 2017:

  •  the lower rate - £2.70 per tonne for inactive waste such as rocks and soil
  • the standard rate - £86.10 per tonne

Scottish landfill tax (SLfT)

Scottish Landfill Tax (SLfT) comes in to effect from 1 April 2015. It is payable to Revenue Scotland.

SLfT is paid on top of normal landfill fees by businesses and local authorities that want to dispose of waste using a landfill site. It is designed to encourage businesses to produce less waste and to use alternative forms of waste management.

VAT should be charged on the full waste disposal fee, inclusive of the landfill tax.

From 1 April 2017, there are two rates of tax:

  • the lower rate - £2.70 per tonne for inactive waste such as rocks and soil
  • the standard rate - £86.10 per tonne

EXEMPTIONS AND TAX CREDITS (SCOTLAND AND NORTHERN IRELAND)

Waste arising from the following activities is exempt subject to meeting certain conditions:

  •  some dredging activities
  • quarrying and mining
  • pet cemeteries
  • restoration of certain former quarries with inert wastes

Tax credits are available for waste that landfill operators send for recycling, incineration or reuse, or to another landfill site.

Landfill operators may be able to claim a tax credit if a customer does not pay the charges for landfilling taxable waste. The credit covers the amount of landfill tax charged to the customer.

Registration

Northern Ireland

If you operate a landfill site you must register with HM Revenue& Customs (HMRC) if you intend to accept taxable waste. If you operate a licensed in-house landfill operation, you must also register for landfill tax. In both cases, you must retain evidence proving that any waste you dispose of under the lower tax rate qualifies. You then have to fill out tax returns every three months.

HMRC: A general guide to the Landfill tax

Scotland

If you operate a landfill site in Scotland, you must register with Revenue Scotland if you intend to accept taxable waste. If you operate a licensed in-house landfill operation, you must also register for  SLfT. In both cases, you must retain evidence proving that any waste you dispose of under the lower tax rate qualifies. You then have to fill out tax returns every three months.

Revenue Scotland

The Landfill Communities Fund (Northern Ireland)

The Landfill Communities Fund (LCF) - formerly the Landfill Tax Credit Scheme - enables operators to both claim a tax credit and contribute money to enrolled environmental bodies that carry out environmental improvement projects. For the year up to 1 April 2014, landfill site operators may claim up to 6.8 per cent credit against their annual landfill tax liability. The percentage may change from year to year.

ENTRUST: The Landfill Communities Fund

The Scottish Landfill Communities Fund

The Scottish Landfill Communities Fund (SLCF)  enables operators to both claim a tax credit and contribute money to enrolled environmental bodies that carry out environmental improvement projects.

Revenue Scotland

Using company cars for your business can be an expensive undertaking. However, there are ways in which you can reduce this burden by opting for greener ways of running your cars and the way you use them.

Vehicle excise duty (VED) and the company car tax system are now based on the amount of carbon dioxide emissions a car produces, not its engine size, as was the case previously. The lower the emissions, the less tax you will pay.

You could also claim up to 100 per cent first-year allowances on the expenditure on a new car, depending on its emissions.

GOV.UK: Fuel consumption and emissions for cars

Biofuel alternatives

Switching your current cars to run on liquefied petroleum gas (LPG), bioethanol or biodiesel could almost halve the rate of fuel duty you pay.

GOV.UK: Fuel duty rates

Cars using LPG and biofuels are less fuel efficient than petrol-consuming cars, but the reduced cost of fuel and reduction in emissions are worth considering. However, the overall environmental benefits of biofuels are a matter of debate as a lot of energy is needed to grow and transport the biofuel crops.

Reducing vehicle use

While there is currently only a congestion charge for driving into central London, other local authorities are looking into its potential to reduce congestion. There is also research being conducted into the viability of road pricing on a national scale. You might want to audit your use of company vehicles, noting how often they are used, at what times and whether they are used to drive into towns and cities.

Minimising the use of company cars where possible will not only improve the environment but could also save your business money. For example, you could replace face-to-face meetings with telephone calls, online discussions or video conferencing, and try to use public transport where possible.

The aggregates levy is a tax on sand, gravel and rock that is dug from the ground or dredged from the sea in UK waters. The tax addresses the environmental damage caused by these business activities in the form of noise, dust and loss of biodiversity.

The tax is designed to:

  • recognise the significant environmental impact of extracting aggregates
  • encourage the use of alternative materials.

Quarry operators must pay a tax of £2.00 per tonne of sand, gravel or rock. If you import these materials, you must also pay the tax once they are used commercially. In both cases, you need to register with HM Revenue & Customs (HMRC).

HMRC: Aggregates levy registration form

There are penalties for not registering or paying the tax.

Exemptions and relief

You will qualify for relief if you export aggregates. You may also qualify for relief if you use one of these materials in a specified industrial or agricultural process. The 80 per cent relief for aggregate extracted and used in Northern Ireland for businesses that sign up to agreements to make environmental improvements to their operations was suspended on 1 December 2010 as a result of a European Court judgment.

Certain materials are excluded from this tax. These include coal, lignite, shale, slate, clay, industrial minerals, soil, vegetable - or other organic - material, cut building stone, lime and cement.

HMRC: Aggregates levy

Businesses can claim relief from corporation tax for land remediation, which means restoring contaminated or long-term derelict land. The rate of relief is 150 per cent of the qualifying clean-up cost.

Clean-up expenditure qualifies if all of the following are true:

  • the land is in the UK and was acquired by the business to carry out its trade or property letting business
  • the land was already derelict or contaminated at the time it was acquired
  • the dereliction or contamination was not caused by action or inaction of the business or a person connected to the business.

Relief extends to buildings on the land. Land is contaminated if contamination is present that is causing or has the real potential to cause significant harm. The cost of dealing with natural contaminants (other than Japanese Knotweed, arsenic or radon) does not qualify for relief.

The relief is only available to businesses subject to corporation tax.

HMRC: Land remediation relief

The money you spend on remediation, i.e. cleaning up land, qualifies if:

  • it is spent on land which is contaminated
  • it is spent on qualifying land remediation
  • it is spent on paying your employees or subcontractors, or on buying materials
  • it would not have been spent if the land wasn't contaminated
  • the cost was not met directly or indirectly by anyone else.

Losses created or increased because of expenditure on land remediation can be surrendered for a payable tax credit of up to 16 per cent of the qualifying land remediation loss.

HMRC: Land remediation tax credits

Land remediation relief is only available to businesses, not to individuals or partnerships. Businesses responsible for polluting the land or adding to existing contamination are not eligible for the relief.

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