Are green taxes tax-efficient?

  • 3 min read
  • 14 Dec 2023

With so many other taxes on our minds, who the heck cares about green tax? Well, we’ll tell you who does… tax-efficient people!

You may have paid your Income, capital gains and any other relevant taxes, but there’s something else that you should be paying attention to… green tax! Want to know more? Great, ‘cause we’re here to tell you it all. 

Let’s get down-to-earth 🌱

What is green tax, you ask? Well, it shouldn’t take too many guesses to realise that the clue’s in the colour 🧐

Green – the colour of all things good and healthy? Kale, matcha, and the Incredible Hulk?      

But there’s more to these taxes than colour connotations! Green taxes, a.k.a environmental taxes, encourage businesses to operate in an environmentally friendly way. 

Green taxes are applied to activities such as: 

As well as promoting environmentally friendly behaviour, the revenue raised from these taxes is said to be spent on environmental protection 💸

Climate Change Levy 

Climate Change Levy (CCL), the ‘fancy’ name for environmental tax, is paid at either the main rate or Carbon price support (CPS) rates

If you haven’t paid it before, then you probably haven’t a scoobie what this means and why would you? Don’t worry, we’ll fill you in!

You’ll pay CCL at the main rate if your business is in one of these sectors: 

  • Industry 🏭
  • ​​Commerce
  • Agriculture 🚜
  • Public services

You’ll pay CCL on things such as:

  • Electricity ⚡
  • Gas
  • Solid fuels – like coal, lignite, coke and petroleum coke ⛏️

You won’t have to pay the main rate if:

  • Your business uses small amounts of energy
  • You’re a domestic energy user 🏡
  • You’re a charity engaged in non-commercial activities

Some good news, we think? 😬

Certain fuels are also exempt from the CCL main rates. And by entering a climate change agreement, energy-intensive businesses can receive tax reductions 🙌

Carbon price support (CPS) rates 

CPS rates encourage the use of low-carbon technology for producing electricity 🔌

CPS rates are paid by owners of electricity generating stations and operators of combined heat and power (CHP) stations. You’ll pay CPS rates for:

  • Gas
  • Liquefied Petroleum Gas (LPG) ⛽
  • Coal and other solid fossil fuels

The grass is sometimes greener… 

You guessed it! We’re talking about green tax relief. Yep, the thing that helps you to ace tax efficiency! 

So, what can you do to make your company’s tax bill greener? Well, quite a bit! 

For starters, you can reduce the amount of green tax you pay by claiming capital allowances when you buy energy-efficient or low or zero-carbon technology for your business. Double-win! ✨

Capital allowances can be used to claim tax relief on things purchased for business use e.g. equipment and vehicle costs. 

Here are some more things you can do: 

  • Remedy contaminated land to claim a 100% deduction from corporation tax ☠️
  • Claim capital allowances for low emissions when you purchase an electric vehicle for your company
  • Get an exemption from business rates by using green energy technology 🔋
  • Developing green technologies? Claim research and development tax relief
  • Claim relief from the Plastic Packaging Tax by exporting finished plastic packaging components 🚢

Eco-efficiency is coming to a town near you 🎬

With all this talk about tax efficiency, let’s not forget about eco-efficiency! ♻️ 

To be eco-efficient, businesses need to lower their impact on the environment by carefully choosing:

  • The natural resources they use
  • The transportation of their products 🛣️
  • The capacity of their products to be recycled

And that’s all, folks! Tax efficiency is your new best friend and eco-efficiency could be too! Two birds, one stone…

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