Tax Incentives for Sustainable Businesses

Conversations about corporate social responsibility (CSR) have increased in number and enthusiasm over the past decade, and there are many good reasons to improve your CSR – and to promote it. This past year, for example, we’ve heard a number of our clients mention that some of their own customers are actually asking about sustainability, because there’s value to them in dealing with sustainable companies. What you might not know is that there are also financial reasons to go sustainable, thanks to a range of green business tax incentives.

Understanding Green Business Tax Incentives

There is a surprising variety of different incentives which can make going green pay. For example, if you’re installing energy-efficient equipment (LED lighting, insulation, and even some heating systems) through AIA or full expensing, you can claim 100% tax relief in the first year against capital allowances. Your equipment will need to meet HMRC criteria, but a reputable installer will already have looked into this and will be able to guide you in what is appropriate to your business and budget but also appropriate. (You can also claim capital allowances when investing in renewable energy like solar power systems, but not through a specific green incentive. However, this can make the initial costs of installing the system more acceptable, and on average solar systems ‘earn out’ their costs for businesses in about four years, with another two decades plus of lifetime to save you money.) It’s also worth talking to the British Business Bank about their Green Finance Initiatives, which can support you in a number of green endeavours depending on your eligibility. Lastly, while few of our readers will qualify, if your business is particularly energy-intensive, you may qualify for the Climate Change Levy relief. This would involve committing to energy efficiency improvements and entering into a Climate Change Agreement – but if you’re already looking to improve efficiency, this is a way to make that easier.

Understanding Environmental Tax Incentives

As you would expect, you can qualify for environmental tax investments by taking actions to reduce environmental impact. This includes energy efficiencies, moving to EV (electric vehicle) fleets rather than traditional vehicles, implementing robust and effective recycling programs and even taking offices paperless. The specifics of what targets need to be hit and how these can affect your corporation tax and local business rates will be too varied to be within the scope of this blog. If you are planning to improve your environmental impact, or if you have already done so this year, it’s worth talking to someone who understands the legislation about the specifics of your program to learn what it can do for you. The government’s own information can be found here.