Reaping Tax Benefits of Green Technology

Reaping Tax Benefits of Green Technology

by:   Ben Davies

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Over the last few years Government, in a push to reduce global emissions, has introduced numerous incentives for businesses to improve green credentials.  Schemes such as the Feed In Tariff (FIT) and Renewable Heat Incentive (RHI) were both introduced to encourage the adoption of renewable energy sources.  Enhanced Capital Allowance (ECA) schemes were created to encourage businesses to use more efficient plant, machinery and vehicles.

Taking advantage of these incentives may not only reduce your ongoing operational costs but could help to improve your Corporate Social Responsibility (CSR) image.

Feed In Tariff

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The FIT was introduced in April 2010 and will pay you for the generation of your own green electricity.  It is currently available for the following types of electricity generation equipment producing fewer than 5 Megawatts:

  • Solar electric photovoltaic’s (PV)
  • Wind power
  • Anaerobic digestion to produce biogas for electricity generation
  • Hydro-electric power (including tidal mills and locks)
  • Small-scale gas-powered combined heat and power up to 2kW

In addition to a reduction in your electricity bill, the FIT pays you for all of the electricity generated, even if you use it yourself, with a bonus payment for any electricity exported to the National Grid.

If used within the business the equipment will also be eligible for tax relief under the Capital Allowance regime at either 8% or 18% per annum depending on the type of generation equipment used.

Renewable Heat Incentive

In November 2011 the RHI also was introduced as a financial incentive for the generation of renewable heat.  For the non-domestic sector it provides a subsidy, payable for 20 years, to eligible renewable heat generators and producers of biomethane.

The RHI is broadly available on the following technologies:

  • Solid Biomass
  • Ground-source heat pumps
  • Water-source heat pumps
  • Geothermal
  • Solar thermal
  • Biogas combustion
  • Biomethane injection

As well as reducing your heating cost and receiving the RHI subsidy if used in the business the equipment will also be eligible for Capital Allowances at either 8% or 18%.  Where the RHI is received for Combined Heat & Power equipment 100% Capital Allowances can be claimed in the year of purchase until 1 April 2014.

Further information on the eligibility criteria for the FTI and RHI can be found at http://www.energysavingtrust.org.uk

Low Emission Vehicles

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In April 2002 100% Capital Allowances were introduced for new (unused) cars with low CO2 emissions (currently set at below 95g/km) and then became available for unused zero emission goods vehicles from April 2010

Enhanced Capital Allowances

Certain plant and machinery which has been specifically certified as energy or water saving is eligible for Enhanced 100% Capital Allowances.  The various categories of products which can be certified as eligible for the enhanced capital allowances are:

  • Air to air energy recovery
  • Automatic monitoring and targeting equipment
  • Boiler equipment
  • Combined heat and power (CHP)
  • Compressed air equipment
  • Heat pumps
  • Heating, ventilation and air conditioning (HVAC) equipment
  • High speed hand air dryers
  • Lighting
  • Motors & drives
  • Pipework insulation
  • Refrigeration equipment
  • Solar thermal systems
  • Uninterruptible supplies
  • Warm air radiant heaters

The complete list of approved products is available at http://etl.decc.gov.uk/etl/site/etl/browse-etl.html

If you would like any further information on these incentives please do not hesitate to contact our tax department.