In this article we will consider UK Tax Incentives, as a trio of the tax enticements readily available to companies aiming to obtain a better ecological footprint and available to the renewables industries in the UK. But first I would like to ask you the following question: “Precisely how commonly do you take into account “UK Tax Incentives/ tax relief” when contemplating the financial viability of an environmental project or sustainable energy / energy conserving scheme, for your business”?
Let’s be honest the majority of us have to reply; “never” or “hardly ever”. However, if so we are making a large error by ignoring UK Tax incentives.
The truth is that the UK government delivers a large variety of levy incentives with the aspiration to motivate more sustainable ventures in the environmental and renewables industries. Nonetheless, despite the existence of these enticements, both those offering services or items (who can themselves benefit) and the end-user’s advisors that could be financially validating their energy saving projects with them, are failing to manipulate these UK tax incentives to the full advantage the government created them for.
There are a number of such tax incentives readily available, however in this write-up I will cover simply three of the most likely to be beneficial. These are Land Remediation Relief (LRR), Enhanced Capital Allowances, and Research and Development (R&D) Levy Relief.
Land Remediation Relief
Land Remediation Relief (LRR), is a 150 percent levy relief which can be used as one of the UK Tax Incentives for remediating contaminated land.
Due to the absence of knowledge of this relief, there are most likely to be many commercial owners of such land just what they could consider to be “insoluble sites” which are thought by their managers to be too pricey to remediate and where development appraisals have actually been made without any type of understanding of LRR which did not appear to be feasible for economic clean-up. Nevertheless, when the Land Remediation Relief tax encouragements offered for remediating such internet sites is added to the equation it can commonly have such a significantly advantageous impact on the development price result, that profitable remediation becomes practical.
The vital point right here though is that with the right tax incentives, programs which appeared to be non-starters, can easily come to be with ease lucrative, the moment a manager, programmer, or investor knows and adds to the project returns, these levy perks. A higher awareness by UK waste management professionals, of this tax incentive would have good ramifications for several sectors consisting of, demolition contractors, land remediation and environmental waste experts, asbestos removal specialists, Japanese Knotweed experts etc., in fact all those involved in remediating polluted land, and building where the land decontamination can then most likely proceed with funding.
Then there are Enhanced Capital Allowances (ECAs), which are a 100 percent up-front tax relief for businesses applying energy, or water, efficiency innovations.
The Carbon Trust has funds it provides from the UK exchequer, for purchasing energy effectiveness measures. The kinds of ventures which could qualify include super low energy light fittings, condensing central heating boilers, incorporated warmth and power plant (CHP) etc. So, we encourage ou readers to consistently check that there is no grant which can be applied for and acquired, at an early stage and always prior to embarking on such ventures.
Professionals quoting for jobs which entail replacing less efficient equipment with more reliable up-to-date modern technologies, ought to additionally be highlighting the way in which the capital cost of their product can be balanced out against the business’s tax invoices each year, very possibly in addition to the receipt of a Capital Trust grant. When this advantage is incorporated into all costings of project expenses, a remarkable reduction in the payback duration of the product / energy effectiveness work, becomes feasible.
So, don’t forget the Enhanced Capital Allowances, and that 100 percent tax relief which is accessible to companies obtaining energy and water efficient equipment. Even if the business acquiring the equipment was loss-making and could possibly not use the capital allowances directly, they can still claim a money rebate from HMRC equating to 19 percent of the loss created from obtaining the innovation.
Enhanced Capital Allowances are available for all kinds of energy and water reliable technologies from rainwater collecting systems at one end of the scale right up to huge waste to energy plants at the other. But, were you previously conscious of the true value of these encouragements?
R&D Levy Relief
Research & Progression Tax Relief (R&DTR) is a tax relief of up to 175 percent offered on certain costs relating to R&D activities, such as the development of brand-new recycling or energy from waste techniques.
Engineering modern technology providers to the waste administration sector are by necessity establishing new modern technologies for the treatment of waste and those exact same companies are also most likely to be enhancing and enhancing existing innovations. The cash spent progressing these technologies could draw in R&D tax relief. For little and medium sized bodies developing these technologies in-house, 175 percent of development expenses (ie personnel prices, powers and materials) will certainly be offered as a levy deduction against profits. Conversely, if acting as a contractor for a larger body, 130 percent of these expenses will be available as a tax deduction.
Here, too, if these deductions are factored into tenders at the beginning, the attractiveness of the offer or proposed job is improved.
You may well ask: “Why, with all these [UK Tax Incentives] enticements readily available to many companies, why are they not more widely benefited from?”
There are 3 primary explanations for this. First of all, and extremely commonly, the primary reason is limited expertise and a low knowledge of their existence. The people that are liable for triggering jobs within companies that can easily make direct use of such levy incentives are more likely to have a land or engineering background, and not tax or accountancy expertise.
As a result, the potential tax benefits of buying a particular project are either not known about or are wrongly not seen as a “main driver” of the financial investment choice, which could come to be when brought into the economic in the right way during early CAPEX and OPEX, cost and return, projections.
The second cause that levy enticements for sustainable venture are not more frequently utilized is the perceived complexity of obtaining the relief. There is no doubt about it that the tax enticements are, at least, troublesome and onerous to get in-practice and at worst, totally confusing to complete.
Claiming ECAs for example, can be needlessly complicated and this is, in our view, itself a significant barrier to investment.
So, we hope that you our readers will definitely not, after reading this, have to deal with the lost opportunity that a shortage of take-up of the accessible levy enticements is implying for a lot of people and businesses throughout the UK. Make certain that you give the right attention to these enticements, and that they are counted-in, for the purpose of assessing the true value of each project.
Make the most of UK Tax Incentives!
This post is based upon a post in CIWM Journal Magazine, in 2010, by Aubrey Calderwood, director of tax professionals Capitus. Capitus is a financial investment and tax incentives consultancy and delivers a free of cost manual on the levy encouragements for sustainable development and urban regrowth. Go to www.capitusgroup.co.uk