Businesses hit by environmental budget

by Rachael Singh

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21 Mar 2012

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A coal power plant with a cooling tower

BUSINESSES COULD BE forced to pay "hundreds of thousands of pounds" more in environmental levies under new measures announced in today's Budget report.

Companies which agreed to make environmentally friendly changes to their operations by signing up to the government's Climate Change Agreement currently receive a 90% discount on energy related levies. The levy - known as the Climate Change Levy (CCL) - is added onto all company electricity bills.

However the Chancellor announced in today's budget that the CCL rate will increase in line with inflation from 1 April 2013.

He also announced that special incentives for combined heat and power companies would end generating £110m in 2013/14, increasing every year to £165m for 2016/17.

Combined heat and power companies currently receive a government incentive if they create the power and sell it back to the national grid. The government will now remove that incentive.

However, PwC's manager of in-direct taxes Jayne Harrold explains that these companies which create heat and power, a more efficient way of creating energy, will be exempt from paying any climate change levy on the power they create - something companies which produce heat and power separately are not exempt from.

"Although they are losing with one hand they are winning with another," she said.

Other environmental modifications include changes to the first year capital allowance on cars, moving to more energy efficient vehicles.

The scheme, which allows businesses to borrow 100% of capital to purchase energy efficient cars, has been extended to March 2015 but, from April 2013 vehicles must be more environmentally efficient if they hope to receive that allowance.

Currently cars which produce 110grams of emissions per kilometre would be eligible for the 100% capital allowance. Now eligible cars must produce just 95g per km of emissions.

These changes could see the government claw back £25m in 2013/14 increasing to £250m in 2016/17.

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