What green tax reliefs and scheme are available to businesses in the UK? Andy Gibbs ATT CTA of TaxAssist Accountants explores just some of the green tax incentives on offer to UK businesses.

What green tax reliefs and scheme are available to businesses in the UK?

Taking steps to make your business greener not only benefits the environment but can also make a positive difference to your bottom line. In a world where sustainability is becoming increasing importance, going green can bring significant tax benefits for your business and community.

There are several tax incentives on offer to businesses and we explore some of these below:

• All-electric vehicles

Where a business incurs expenditure on or after 1 April 2021, a 100% first year allowance (FYA) is available for new electrically propelled and zero emission cars. This means the entire cost of the vehicle may potentially be set against business profits.

For cars which are more polluting and that do not qualify for a FYA, they must instead be allocated to a pool by reference to an emissions threshold. The emissions threshold is currently 50g/km for expenditure incurred on or after 1 April 2021. Expenditure on a car within the emissions threshold is allocated to the main rate pool (18% writing down allowance (WDA) each year) and expenditure on a car exceeding the threshold is allocated to the special rate pool (6% WDA).

This provides a big incentive to purchase a more environmentally friendly car, as you can write the cost off far more quickly than with a car with higher CO2 emissions.

• Reduced benefit in kind on staff cars

As well as providing an initial tax saving, the company owner or employee who drives the car, can also benefit by saving tax on a much-reduced car benefit charge. The benefit in kind rules do not apply to sole trade or partnership businesses.

Where a small business makes a car available for staff members, opting for fully electric vehicles reduces the tax charge which may be levied on the staff members. The rate of 1% of the list price for 2021-22 will increase to 2% for 2022-23.

For an employee who is a higher rate (40%) taxpayer, who is provided with a car from 5 April 2022, the tax savings could be significant.

Example

If the list price were, say, £40,000, tax would be calculated as 40% x (2% x £40K) = £320. The business would have an NIC liability of only £120.40 – 15.05% x (2% x £40K).

Assume the employee / director pays tax at the higher rate (40%) and compares the benefit in kind of a £40K electric car with a £40K petrol car with high CO2 emissions of 160 CO2 g/km over the 2022/23 tax year:

Car type	List price	Relevant percentage	Tax rate	Tax cost
All electric car	£40,000	2%	40%	£320
Petrol 160 CO2 g/km car	£40,000	37%	40%	£5,920

Tax saving = £5,920 less £320 = £5,600

The above example only considers tax but demonstrates the potential savings which may be made.

• Electric vans

A business shouldn’t overlook the tax benefits that an electric van offers over a traditional petrol van. A tax saving may be made in respect of the benefit in kind which an individual pays tax on, when provided with an electric van by their employer.

In general, no taxable benefit arises on either a petrol or electric van if the van is only used for business journeys plus ordinary commuting. Where the van is used for more than this, a benefit in kind charge may arise.

From April 2021, no van benefit charge arises for employees or directors who drive fully electric vans, even where they use the van privately.

For an employee or director who pays tax at 40%, the tax charge on having a traditional petrol van with private use for the full 2021/22 tax year would be £1,400 (£3,500 X 40%). If they switched to an all-electric van, the tax bill would drop to zero, a significant tax saving of £1,400.

• Electric Vehicle (EV) charge points

As the popularity of electric vehicles surges, there is an increasing need for vehicle charging points. The Workplace Charging Scheme (WCS) is a voucher-based scheme that provides eligible applicants with support towards the upfront costs of the purchase and installation of electric vehicle (EV) charge points.

The Office for Zero Emission Vehicles (OZEV) runs the scheme and is administered by the Driver and Vehicle Licensing Agency (DVLA). It’s available in England, Wales, Scotland and Northern Ireland, but not in the Channel Islands or Isle of Man.

This voucher-based scheme offers financial support towards the initial purchase and installation costs for electric vehicle charging points.

The grant covers up to 75% of the total costs of the purchase and installation of EV charge points (inclusive of VAT), capped at a maximum of:

• £350 per socket
• 40 sockets across all sites per applicant

• Cycle to Work scheme

A business could consider implementing a Cycle to Work scheme.

There are several variations to the scheme. One method is to use a salary sacrifice option which allows the employer to purchase or lease the bike from an approved provider. The business can then hire the bike back to the employee. By implementing the scheme, employees could save up to 47% off the cost of a bike through income tax and National Insurance savings.

There could also be an additional cash saving benefit from capital allowances for the business.

In addition to the tax benefits for staff and your business, you encourage a healthier workforce and reduce the number of car commuting journeys.

The rules determining which projects can and cannot qualify for relief are complex and open to interpretation. You must also ensure the relief is claimed in the correct manner.

Summary

It should be noted that the above information is intended to inform rather than advise and is based on legislation and practice at the time of publication. Taxpayers’ circumstances do vary, and individuals and businesses should consider taking professional advice before taking action.

About the author

Andy Gibbs ATT CTA is Head of Group Technical at TaxAssist Accountants, who is a qualified Chartered Tax Adviser (CTA) and holds the STEP Advanced Certificate in Trust and Estate Accounting. He has dealt with both tax compliance and tax advisory projects across a range of industry sectors.

See also

Can companies legally ask staff to self-isolate if they have COVID-19?

Employment law: what to expect in 2022 and beyond

Find out more

Environmental taxes, reliefs and schemes for businesses (GOV.UK)

Claim capital allowances: First year allowances (GOV.UK)

Tax on company benefits: Tax on company cars (GOV.UK)

Workplace Charging Scheme: guidance for applicants (GOV.UK)

Cycle to work scheme implementation guidance for employers (GOV.UK)

Image: Getty Images

Publication date: 16 March 2022

Any opinion expressed in this article is that of the author and the author alone, and does not necessarily represent that of The Gazette.