Environmental tax enables organisations or businesses in the UK to function in an ecologically conducive manner. These schemes and taxes vary for nature of business or organisation and organisation size. An organisation might be eligible for tax relief in certain cases like:
Businesses/organisations can pay reduced tax by opting for schemes to enable a business to validate that it’s functioning more competently and producing waste which is not very harmful. As part of the UK Industrial plan, it is imperative to encourage organisations and businesses to continue to reduce the carbon footprint.
Climate Change Levy (CCL)
CCL is paid at either the carbon price support (CPS) rates or main rates. Main rates encompass gas, electricity, and solid fuels such as coal, coke, lignite, and petroleum coke. Organisations or businesses are liable to pay the main rates of CCL if the business activities are either of the following nature – agricultural, commercial, and industrial or public services. However, a business or organisation does not have to pay CCL’s main rate in case the business uses small amount of energy, or charity involved in non-commercial activities or it is a domestic energy user. In other words, supplies excluded from CCL’s main rates are the ones used for non-business activities by charities or for domestic use. These taxes are collected by HMRC. The following are exempt supplies:
|by small generating stations (other than combined heat and power (CHPs)) and stand-by generating stations not used as fuel||Climate Change Levy 1/3, section 3|
|for use in some forms of transport||Climate Change Levy1/3, section 3|
|for use in mineralogical and metallurgical processes||Climate Change Levy1/3, section 3.14|
|for use in the production of taxable commodities other than electricity||Climate Change Levy1/3, section 3|
|not for consumption or burning in the UK (exports)||Climate Change Levy1/3, section 3|
|not used as fuel||Climate Change Levy1/3, section 3|
|of electricity from Good Quality CHP stations in some circumstance||Climate Change Levy1/3, section 3; and Climate Change Levy1/2|
|of electricity generated from renewable sources, excluding electricity generated on or after 1 August 2015||Climate Change Levy1/3, section 3; and Climate Change Levy1/4|
|of taxable commodities other than gas or electricity intended for re-sale||Climate Change Levy1/3, section 3|
|to electricity producers (other than CHP stations, stand-by generating stations, and small generating stations)||Climate Change Levy1/3, section 3|
|to CHP stations subject to restrictions||Climate Change Levy1/3, section 3; and Climate Change Levy1/2|
Climate Change Levy rates
The main climate change levy rates are charged when energy is supplied to end users, whereas, CPS rates are levied when a taxable supply (for self-use) of fossil fuels is made for usage in electricity generation.
Main rates of CCL
|Taxable commodity||Rate from 1 April 2017||Rate from 1 April 2018||Rate from 1 April 2019||%Change (2017-2018)|
|Electricity (£ per kilowatt hour (KWh))||0.00568||0.00583||0.00847||2.6%|
|LPG (£ per kilogram (kg))||0.01272||0.01304||0.02175||2.5%|
|Natural gas (£ per KWh)||0.00198||0.00203||0.00339||2.5%|
|Any other taxable commodity (£ per kg)||0.01551||0.01591||0.02653||2.6%|
Electricity, gas and solid fuel are usually exempt from CCL’s main rates of CCL if either of the following apply:
Percentage discount for holders of a CCA
|Taxable commodity||Rate from 1 April 2017||Rate from 1 April 2018||Rate from 1 April 2019|
|Any other taxable commodity||65%||65%||78%|
CPS rates of CCL
|CPS rate commodity||Gas||LPG||Coal and other solid fossil fuels|
|Unit||£ per kilowatt hour (kWh)||£ per kilogram (kg)||£ per gigajoule (GJ) on gross calorific value (GCV)|
|1 April 2016 to 31 March 2019||0.00331||0.05280||1.54790|
The carbon price support rates are not applicable in Northern Ireland (NI). The CPS rates lay emphasis on using low carbon technology for producing electricity in the industry. CPS rates are payable for coal, LPG, gas, and other solid fossil fuels. The CPS rates are payable by operators of CHP stations and owners of electricity generating station.
CRC Energy Efficiency Scheme
The CRC Energy Efficiency Scheme, previously referred to as the Carbon Reduction Commitment,is applicable for large, non-energy-intensive businesses or organisations such as all central government departments, banks, hotels, water companies, local authorities (including state-funded schools), and supermarkets.
This scheme was designed to reduce carbon dioxide (CO2) emission and improve energy efficiency in public and private sector organisations that consume high energy. The scheme is administered by the Environment Agency in the UK and regulates the scheme in England. In other areas such as Scotland, Ireland, and wales – The Northern Ireland (NI) Environment Agency, Scottish Environment Protection Agency, and Natural Resources Wales regulate the scheme. However, energy which is previously enclosed under the EU Emissions Trading System and climate change agreements is not covered under CRC.
Certain public bodies, referred to as mandated participants, must take part in the CRC Energy Efficiency Scheme irrespective of the electricity consumed by them. All devolved administrations and UK central government departments qualify as mandated participants. The scheme operates in phases – the initial phase began in April 2010 and ended in March 2014. The second phase began in April 2014 and will run until 31 March 2019. There is a qualification year for each phase and businesses that meet some specific criteria during a qualification year will be eligible to register for the subsequent phase of CRC. In each compliance year, businesses that have registered for CRC needs to abide by the following:
The EU Emissions Trading System (EU ETS) impacts organisations or businesses from energy-driven sectors. The system lets businesses buy and sell greenhouse gas emission allowances to reduce their organisation’s environmental impact. In case, a large organisation is not covered under the EU ETS they are covered under the CRC Energy Efficiency Scheme. If an organisation or business is covered under the EU ETS, it must meet targets by trading emissions allowances and cutting business emissions.
In order to trade allowances, a business needs to open an EU Registry account. Once the account is active, an organisation can then trade allowances by:
Businesses or organisations can compute greenhouse gas emissions by multiplying the amount of energy used by the emissions produced. Businesses need to perform the computation for each type of energy used. To perform the calculations, businesses need to know:
Capital allowances on energy-efficient items
Businesses can claim capital allowances when they purchase energy competent, or zero-carbon technology for the business. This enables the business to pay a reduced amount of tax. A business can be eligible for ‘enhanced capital allowances’ for the subsequent water and energy efficient equipment:
Businesses are liable to pay tax on top of the normal landfill fees if the organisation or business gets rid of waste using landfill sites. Organisations need to get a permit and register inside 30 days of setting up else could be fined. Here the tax is payable by weight:
|Rate||Amount payable by business|
|Lower rate for inactive waste such as rocks or soil||£2.65 per tonne|
|Standard rate||£84.40 per tonne|
Businesses are not liable to pay Landfill tax for activities such as dredging, quarrying and mining, pet cemeteries and inactive waste used for filling quarries. Additionally, businesses are eligible to get tax credits if they send waste from recycling, reduce to ashes or reused.
This tax is levied on gravel, sand, and rock that’s either been dredged from the sea in UK waters, dug from the ground or imported. Usually, businesses are liable to pay tax of £2 per tonne of gravel, sand, or rock.