To encourage businesses to cut their carbon footprint, we’ve seen a number of “green” capital allowances initiatives pop up over the last 20 years.
However, in 2020, that list was reduced. Significantly. So, we thought it would be helpful to set out where these allowances are still available so your business can make the most of them as you become more “green”.
WHAT ARE THE GREEN CAPITAL ALLOWANCES?
From April 2021, first-year allowances remain available on the following items:
- New and unused cars with CO2 emissions of 0g/km or electric cars;
- New and unused zero-emission goods vehicles;
- New electric vehicle charging points; and
- Gas refuelling stations for dispensing natural gas, biogas or hydrogen fuel for the refuelling of vehicles until 31 March 2025.
Enhanced capital allowances are still available for certain new, low emission or electric cars. From April 2021, the limit for low emission cars will be reduced from 50 g/km as it is now to 0 g/km. HMRC accepts that a car is new (i.e. unused and not second hand) even if it has been driven a limited number of miles for testing, delivery, test drives by a potential purchaser, or use as a demonstration car.
The deadline for 100% ECA for zero-emission goods vehicles has been extended for a further four years to 2025. However, as all commercial vehicles qualify for 100% relief under AIA, this special FYA has not been used by a significant number of businesses during the three year period of increased, £1m AIA limit. Since April 2015, a further restriction has been imposed that limits the availability of this ECA to businesses that do not also claim other state aids, such as the Government’s ‘plug-in van’ grant.
The first-year allowance introduced to support the development and installation of electric recharging equipment for electric vehicles has now been extended to 2023. This is part of the increasing Government focus on promoting the wider uptake of electric vehicles. The measure provides a 100% first-year allowance for electric charge-point equipment on qualifying expenditure incurred from 23 November 2016 until 31 March 2023 for corporation tax purposes, or 5 April 2023 for income tax.
WHAT OTHER CAPITAL ALLOWANCES INCENTIVES ARE THERE FOR MAKING YOUR BUSINESS GREEN?
One relief that is overlooked sometimes is the eligibility of adding thermal insulation to an existing building. This has a wider definition that simply installing insulation in ceiling voids, so not to be underestimated on a refurbishment or fit out project. Whilst it does not attract an enhanced capital allowance, it is still eligible for Annual Investment Allowances, so can still deliver 100% relief in year one.
Another area that often comes within capital allowances assessments is land remediation relief. Although not technically a capital allowance, it is a relief generally available to any company that is dealing with contaminated sites or buildings, provided that the company has not contaminated the site itself.
This relief was introduced to encourage the cleaning up of contaminated brownfield land in the main and then extended to allow for certain works within derelict sites. Typically, costs claimed relate to asbestos, hydrocarbons and Japanese Knotweed, but claims can cover a whole range of “nasties”.
WHAT IF I DON’T MEET THE REQUIREMENTS FOR THESE GREEN ALLOWANCES?
Not all is lost…
For one thing, you can claim annual investment allowances of up to £1m per annum (until 31 December 2021), then £200,000 per annum from 1 January 2022. This is available to most businesses, but cannot be used for cars.
Secondly, for companies, there is the much-publicised Super Deduction that gives 130% relief for expenditure on plant and machinery (including some fixtures within buildings) and an alternative 50% Enhanced Deduction in year one for heating and ventilation systems, electrical systems, hot and cold water systems, lifts and external solar shading. Relief for the balance of the 50% Enhanced Deduction is then given over a number of years.
The Super Deduction and Enhanced Deduction are not currently available for plant and equipment lessors and commercial property landlords, but watch this space as we are waiting on more detailed explanations from HMRC on this area. Again, this cannot be used for car purchases.
By using these two reliefs together, it may still be possible to achieve 100% year one claims for most expenditure, so they’re well worth a look.