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Green tax relief for commercial solar energy

business green energy tax relief

Written By Toni

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May 2, 2024

Did you know that your company can claim business tax relief on energy efficiency measures and equipment?

As the world shifts towards greener energy solutions, it is only logical that commercial businesses do the same.

The UK is the first major economy to introduce its own carbon reduction scheme and has pledged to reduce its greenhouse emissions to net zero by 2050. To reach this target; the UK Government has created new tax exemptions and rewards that encourage companies to switch to renewable energy.

As well as lowering business energy costs; commercial solar panels and battery storage units generate a sustainable energy supply that can also help to lower global temperatures.

Government tax incentives reward companies who commit to reducing climate change; meaning substantial money can be saved on the cost of installing renewable energy systems. This can then be reinvested back into your company’s economic growth! 

Here are the latest environmental taxes incentives available to UK businesses in 2024 and beyond.

The Climate Change Levy or CCL

This tax was created to encourage businesses to operate in environmentally friendly ways by decreasing their energy usage and carbon emission outputs.

If your business operates in any of the following industry sectors; it will be subject to paying this tax. 

  • Industrial 
  • Commercial 
  • Agricultural 
  • Public Services 

The tax usually charges businesses at the main rate if they use: 

  • Electricity 
  • Gas 
  • Solid fuels – such as coal, lignite, coke and petroleum coke 

However, there are instances where businesses may be fully or partially exempt from paying the CCL.

Tax exclusions apply to some ‘domestic’ classed businesses; here are some examples:

  • Armed forces residential accommodation 
  • Children’s homes 
  • Homes for the elderly and disabled 
  • Hospices 
  • Monasteries, nunneries, and similar religious communities
  • School and university residential accommodation for students and pupils

Please note – hospitals, prisons, hotels and similar establishments do not qualify for domestic use exclusion. 

Charities that use their energy supplies for non-business activities do not need to pay CCL main rates.

If a business uses its premises for domestic or non-business charity purposes for at least 60% of its total use; then its whole energy supply is exempt from the Climate Change Levy. 

Your business may be eligible for a reduced rate as part of the Climate Change Agreement. Check here for more information.

It’s also important to note that as of 1st April 2024 the Climate Change Levy rates have changed. Check here to see how this could affect your business. 

Annual Investment Allowance or AIA

This initiative allows businesses to deduct the full cost of solar equipment from profits before tax. In 2019, the threshold cost of equipment was raised to £1million for both sole traders/partnerships and limited companies. 

VAT Energy-Saving Materials Relief 

Some businesses do not have to pay VAT on energy-saving materials from February 1, 2024, to March 31, 2027. After this date – it will revert to the reduced rate of 5%. 

Charities that have made their buildings more energy efficient can now receive extended relief. This may include village halls or similar local community buildings. 

This relief also includes the following energy saving technology and measures: 

  • Electrical storage batteries 
  • Water source heat pumps 
  • Diverters that enable excess ‘green’ electricity to be used in the same building it’s generated; instead of sending it to the grid. 
  • Groundwork needed to prepare for the installation of ground or water-source heat pumps. 

Accelerated Business Rates Green Reliefs 

Companies can receive business rate tax exemptions for equipment purchased for onsite renewable energy generation and storage. This is valid until March 31, 2035 and includes:

  • An exemption from business rates for plant and machinery used in onsite renewable energy generation and storage. This includes rooftop solar panels and battery storage used with renewables and electric vehicle charging points
  • 100% relief for eligible low-carbon heat networks listed as separate properties on the rating list. 

From 1st April 2023 until 31st March 2026, businesses can also claim: 

  • 100% first-year allowance for main expenditure – also known as full expenditure. 
  • 50% first-year allowance for special rate allowance. 

The measure aims to encourage businesses to invest in equipment by temporarily increasing the available tax relief. This means you can save more on your tax bill by investing in as much equipment as you like. As there is no limit on qualifying expenditure; the more you invest, the more you can save!

IEG – Bringing you relief through tax and energy savings

Here at IEG. We can help to lower long term business costs through solar energy packages that will save you tax and help to save the planet! Contact us today for more information.

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