6 Mins
We all want to help our beautiful planet, don’t we? Doing things in a more sustainable way just makes sense. The good news is that by focusing on these 4 key areas, you can help yourself too, and pay less tax:
- Capital Allowances – Super-Deduction and Special Rate Allowance
- Land Remediation Relief
- Electric Cars
- Research and Development
Super-deduction and Special Rate allowance
Thanks to the Treasury, there’s now a way to cut your business’ tax bill by means of the super-deduction. Essentially, as of 1 April 2021, plant and machinery that you’re buying for your company (note: the super-deduction isn’t available to individuals or partnerships) will earn a deduction of 130% against the taxable profits of your business.
So, if you were to buy machinery or equipment for £10,000, your company’s taxable profits would be reduced by £13,000.
What does this have to do with the environment? If you’re thinking of altering your workspace as part of the post-COVID-19 adjustments that we’ve all made, the Special Rate allowance is a perfect opportunity to make your workspace more energy-efficient with a more modern heating or lighting system, or perhaps some solar panels. Air conditioning is also covered in this Special Rate allowance.
If your company spent £10,000 on any of these things, the company would receive a £5,000 deduction against taxable profits (50%) in year 1 and the remaining would be written down by 6% per year in future years (£5,000 x 6% = £300 allowance in year 2, £4,700 x 6% = £282 allowance in year 3 etc). Everybody wins here – and perhaps most importantly, the environment benefits too.
Now that the concept of remote working is firmly embedded within the British psyche, what better time to up your business game and make it as easy as possible for your colleagues to work from home, thus saving the environment the cost of all that commuting? The super-deduction is perfectly aligned with this aim.
Henderson Loggie’s tax experts know all the ins and outs of the super-deduction: for instance, cars don’t qualify, but vans do. The time you dispose of your business assets is also key; there’s a balancing charge in the year of disposal, so having an expert guide you on the best times to make things happen is critical. Fortunately, we’re very easy to get hold of for a helpful chat!
Land Remediation Relief
Another way to help the environment in a way that reduces your business tax burden is through Land Remediation Relief. If you’ve bought land or buildings which for some reason are contaminated, for example, with harmful substances like asbestos, arsenic, or with invasive plants like Japanese Knotweed, for instance, you have a duty to clean it up – both to the environment and the people who will be using the land. Fortunately, the government gives you a tax break to inspire you to do so.
LRR is time-limited, so claims have got to have been made within 2 years of the end of the year of purchasing the land, and obviously, you can’t claim if you’ve caused the problem yourself!
However, it’s a significant incentive of 150% – that is, an extra 50%, showing that the government really does mean business here. If you’ve made a loss for the year, you can also surrender your loss and claim 16%, a 24% cash return on qualifying expenditure.
Electric Cars
Want a brand-new, zero-emission electric car? The great news is that 100% of its cost can be offset against your taxable profits. (You don’t have to be a limited company for this, as for the super-deduction; this also applies to both individuals and partnerships.)
You can make a saving for your company at the 19% rate of corporation tax, whilst as an individual you can save at your top rate of income tax, whether that’s 19%, 20%, 21%, 41%, 45% if you are a Scottish taxpayer; or 20%, 40%, or 45% if you are a UK taxpayer.
(Do note, though, that personal use of the car isn’t included; the savings are restricted to your business use.)
Again, timing is important here: make sure your new car is delivered to you before your year-end, to make sure that it qualifies in that year. It has to be brand-new and fully electric to check all the government’s boxes. Although prices for electric cars are still high, they are coming down, and as company cars, they’re the perfect choice as the benefit in kind is linked to emissions. The benefit in kind is 2% for the current tax year, and this will remain so for the next 2 tax years.
You can also allow your employees to charge an electric car at work, on which no taxable benefit arises. The charging points you’ll need to install will qualify for the super-deduction, so once again, you and your employees are winning – and so is the environment.
Research and Development
If your company is investing in or developing, any kind of green technology, the government has once again provided a great tax incentive to encourage you. If your project is to help your business overcome some kind of technological uncertainty or create a specific technical advancement, then your company can claim Research and Development Relief – and although the government’s checks on companies who claim this are becoming more robust, it’s still a very wide-ranging field.
For example, if you’re trying to improve your business processes and systems in order to reduce your carbon footprint, or if you want to reduce your waste products or water consumption, you may well be able to claim Research and Development Relief.
Of course, you may only be at the very start of your company’s journey to becoming more environmentally friendly. If that’s the case, then we’ve found a couple of helpful resources to get your thinking started: here is the WWF Guide to a Sustainable Workplace, and the GreenCleanGuide to using water sustainably.
Let’s wrap up
Whatever your business, as technology advances, it’s clear that the face of the workplace is changing for good. Corporate social responsibility isn’t just something people talk about; it’s something that many regards as a simple duty. (Statistics clearly show that companies who DO it, rather than just talk about it, actually do better financially, interestingly enough.)
Having an expert on hand to save you time and energy, and reduce your stress levels is a win, whichever way you look at it.
So, wherever you’re up to, your tax is our business, and our friendly, expert team here at Henderson Loggie is at the end of a phone (01382 200 055) for any questions you might have. Alternatively, you can fill in the contact form below and we’ll get back to you soon.