PBR 09: Climate Change Levy increased

Business could be forced to pay "hundreds of thousands of pounds" more in environmental levies under new measures announced in today's pre-Budget report.

Companies which have agreed to make environmentally friendly changes in their operations currently receive an 80% discount on their Climate Change Levy. However new measures announced by chancellor Alistair Darling will reduce that to 65% by April 2011.

Currently, all businesses must pay a Climate Change Levy - a fraction of a penny per kilowatt - for energy used. Revenue generated is paid directly to the electricity provider.

Companies which sign a "climate change agreement" with the government Department for Energy and Climate Change, pay a discounted rate in return for making environmental improvements.

The move may cost companies "hundreds of thousands of pounds" and will affect "a number of large businesses" according to Barbara Bell, senior manager of environmental taxation at KPMG.

Bell was also concerned the change could be a sign of things to come.

"Are we working towards abolition of the reduced rate?" she said.

"This is the first time in ten years there has been a change in the reduced rate. This could be a small part of much bigger changes."