Environmental taxes and reliefs have one primary aim. It is to encourage businesses to operate in a more environmentally friendly way.
UK Government operate a range of green taxes and schemes for various business types and sizes. So, you might be exempt from some taxes, or get reliefs, if:
- The nature of your business means you use a lot of energy.
- You run a small business that uses a small amount of energy.
- You buy energy efficient technology for use by your business (e.g. to reduce its carbon footprint).
Note: Applying for certain schemes to help you demonstrate that you operate more efficiently, and produce less damaging waste, means your business can pay less tax.
Climate Change Levy
There are two different rates for the Climate Change Levy (CCL). Thus, you would either pay the main rates or the Carbon Price Support (CPS) rates.
Main Rates of CCL
Your business would pay Climate Change Levy at the main rate on:
- Solid fuels (e.g. coal, coke, lignite, and petroleum coke)
Note: You will find Climate Change Levy main rates and allowances listed on the energy bill for your business.
Who Do CCL Main Rates Apply to?
As an end user, you would pay the main rates of CCL if the business you are running is one of these sectors:
- Public services
If a supply qualifies for one of certain types reliefs, CCL would not be payable at all – or payable at a rate below the main rates. So for example, you would not pay main rate of CCL on certain supplies, such as:
- A business using small amounts of energy.
- A charity that is engaged in non-commercial activities.
- A domestic energy user.
Fuels Exempt from CCL Main Rates
As a rule, electricity, gas, and solid fuel will be exempt from the main rates of CCL if (any):
- The electricity was generated from renewable sources before the 1st of August 2015.
- They will not be used in the United Kingdom.
- They are used to produce electricity in a generating station with a capacity of 2MW (or greater).
- They will not be used as fuel.
- They are used in certain forms of transport.
- They are supplied to (or from) certain combined heat and power (CHP) schemes registered under the CHP quality assurance (CHPQA) programme.
Note: Check other exemptions and reliefs showing which supplies of taxable commodities the full rates of CCL do not apply.
Paying a Reduced Rate of CCL
You could get a reduction on the main rates of CCL if you (both):
- Operate an energy intensive business.
- Have entered into one of the climate change agreements (CCA) with the Environment Agency.
In some cases, energy intensive businesses can get a 90% reduction for electricity. They may also qualify for a 65% reduction for coal, other solid fuel, gas, and liquefied petroleum gas (LPG).
Note: You can get extra advice and information from your industry trade association.
Carbon Price Support Rates of CCL
The purpose of CPS rates of CCL is to encourage industry to use low carbon technology for producing electricity. Thus, you would pay CPS rates for:
- Coal (and other solid fossil fuels)
Who Do CPS Rates Apply to?
Owners of electricity generating stations, along with operators of combined heat and power (CHP) stations, pay CPS rates of CCL.
CPS rates do not apply to certain suppliers. They include small generators, stand-by generators, and generating stations in Northern Ireland.
CRC Energy Efficiency Scheme
The CRC Energy Efficiency Scheme was previously called the ‘Carbon Reduction Commitment’. The new version covers large, non-energy-intensive organisations, such as:
- All central government departments
- Local authorities (includes state-funded schools)
- Water companies
Businesses that qualify for the CRC Energy Efficiency Scheme should already have registration. But, you now need to:
- Buy enough allowances to cover your annual emissions and surrender them at the end of the year.
- Monitor and report your CO2 emissions from gas and electricity use.
Emissions Trading (EU ETS)
The EU Emissions Trading System affects businesses from energy-intensive sectors. In most cases, it relates to the energy industry and to certain types of manufacturers.
In short, the scheme allows you to buy and sell greenhouse gas emission allowances. The main purpose of doing so is to reduce the environmental impact produced by your organisation.
The CRC Energy Efficiency Scheme (details above) covers large organisations that the EU ETS scheme does not cover.
The Way it Works
If the EU ETS scheme does cover your business, you will need to meet targets. These will include cutting business emissions and trading emissions allowances.
The first step is opening an EU Registry account so that you can trade your allowances. You would then be able to trade allowances by:
- Bidding at United Kingdom Government (or other EU member state) auctions.
- Buying or selling from intermediaries (such as banks and specialist traders).
- Joining one of the several exchanges that list carbon allowance products.
- Trading directly with other businesses.
- Using the services of a broker.
Calculating Greenhouse Gas Emissions
You would calculate your greenhouse gas emissions by multiplying the amount of energy used by the ’emissions they produce’. You would need to work this out for each type of energy that you use.
So, to carry out this calculation you would need to know:
- How much non-renewable energy you used (found on gas, electricity, and water bills, invoices, and receipts).
- The greenhouse gases produced by each type of energy (called the ’emission factor’). The government will update the emission factors every year.
Note: Department for Business, Energy & Industrial Strategy produce emission conversion factors for greenhouse gas company reporting to help you calculate carbon emissions online.
Capital Allowances on Energy Efficient Items
Buying energy efficient technology, or low or zero-carbon technology, for your business means you will be able to claim capital allowances. This will reduce the amount of taxation that you pay.
Businesses that get rid of waste using landfill sites will pay tax on top of the normal landfill fees. HMRC produce further guidance on who pays Landfill Tax on waste at unauthorised sites.
Note: Getting rid of waste at sites not authorised for landfill means you will get charged Landfill Tax. There may also be a penalty or court action involved.
Guide for Landfill Operators
You will need to:
Rates of Landfill Tax
There are two individual rates for Landfill Tax (charged by weight). For example, the lower rate would apply to ‘inactive waste’ (e.g. rocks or soil).
- Lower rate is £2.80 per tonne
- Standard rate is £88.95 per tonne
Loss on Ignition (LOI) Testing Regime
The ‘Loss on Ignition’ testing regime was introduced on the 1st of April 2015 to improve compliance by helping prevent mis-description of waste fines for Landfill Tax purposes.
If your landfill site accepts waste fines, you may need to carry out a loss on ignition test to help determine the rate of tax to pay.
Landfill Tax Exemption:
- Dredging activities
- Inactive waste used for filling quarries
- Pet cemeteries
- Quarrying and mining
Note: Sending waste from landfill to be recycled, incinerated, or reused means you will be able to get tax credits.
There is a tax on sand, gravel, and rock (called ‘Aggregates Levy’) which relates to substances that have been (any):
- Dug from the ground
- Dredged from the sea in United Kingdom waters
You would need to register for Aggregates Levy with HM Revenue and Customs if your business exploits aggregate in the United Kingdom (e.g. a quarry operator).
Note: Remember to notify HM Revenue and Customs (HMRC) how much aggregate you produced or sold every quarter.
You would pay taxation of £2 per tonne of sand, gravel or rock. The price for smaller amounts is less (e.g. £1 per half a tonne). You would still need to pay the tax even if you import the materials.
Exporting aggregates, or using them in some industrial or agricultural processes, means you can get tax relief. It may be eligible for relief if you do not use the material as aggregate.
The rules on environmental taxes exclude certain materials from the tax. Typical examples include things like soil, vegetables, or other organic matter.
Note: HMRC produce a general guide to Aggregates Levy (UK tax on the commercial exploitation of rock, sand, and gravel).