Government hopes to claw £745m in 5 years from green taxes

THE CHANCELLOR has announced changes to environmental levies which could raise up to £745m in five years for the government.

Companies that had previously been exempt from paying levies will no longer enjoy these exemptions from next year, according to plans laid out in yesterday's Budget.

Currently, all companies must pay a Climate Change Levy - a fraction of a penny per kilowatt - for energy used. However, certain industries that create their own heat and energy and use it for their own purposes, were exempt. Industries that are now likely to face the levy include chemicals and pharmaceuticals.

Jonathan Main, partner and UK head of environmental taxes at PwC, labelled the move a "hotch-potch" of environmental taxes that will bring added complexity to an already complicated area.

"There are so many now, with the Carbon Reduction Commitment, the Climate Change Levy, Landfill duties etc, and that's not taking into account the European Emissions Trading Scheme," Main said. "The government has a desire to simplify taxes, but they haven't done that here."

Discarding the exemption is estimated to raise the government about £120m in 2014/15; £125m in 2015/14; £150m in 2015/16; £165m in 2016/17; and £185m in 2017/18.

There is a reprieve for businesses that sign up to a "climate change agreement" with the Department for Energy and Climate Change. They could receive a discount of up to 80% in return for making environmental improvements.

The government also announced an extension of capital allowance relief for low carbon company cars. Previously, any car that emitted less than 160 grams of carbon per kilometre, could be bought using capital allowance. Only cars that emit 130gk are now exempt.

Alastair Kendrick, director of tax at MHA MacIntyre Hudson, said industry previously boycotted this change because there were very few cars that met the requirement.