Environmental taxes such as climate change levy (CCL) and landfill tax have grown in importance in recent years. Most businesses are only indirectly affected by environmental taxes, but businesses involved in industries such as power generation and waste disposal are more directly affected.
Climate change levy is charged on most forms of energy used by businesses, including electricity, natural gas and solid fuels. Energy suppliers collect CCL by including it in their business customers’ bills.
Domestic supplies are exempt from climate change levy and small businesses that use only a minimal amount can also qualify for exemption. At the other end of the scale, energy-intensive businesses can qualify for a reduced rate of CCL by meeting negotiated energy reduction targets.
Landfill tax is charged on waste disposed of through landfill. There are two rates of landfill tax, with a lower rate applying to less polluting types of waste such as rubble.
Landfill tax is paid by landfill site operators, with the costs passed on to businesses by waste disposal contractors that use the landfill site.
A number of taxes including the excise duty on fuel, road tax (vehicle excise duty) and the taxation of company cars all act as environmental taxes. There is also a congestion charge for driving in London and additional charges for more polluting vehicles in the London Low Emission Zone.
Air passenger duty is charged to airlines, with the costs typically being passed to passengers via ticket cost. The rates payable depends on the distance travelled and the class of travel.
An aggregates levy is charged on most types of sand, gravel and rock. Both quarry operators and aggregates importers pay the levy, passing the costs on to businesses that use these products.
The impact of environmental taxes such as CCL and landfill tax can be reduced by changing the way your business operates, for example by improving energy efficiency, reducing waste and avoiding unnecessary travel. As well as reducing environmental taxes, this will reduce your overall costs.
Some energy-saving products qualify for enhanced capital allowances, allowing 100% of the cost to be set against income in the year of purchase.
Particular opportunities exist in terms of company cars, where environmental taxes are significantly lower for vehicles with lower emissions. More efficient vehicles are also likely to offer better fuel economy.
If you would like further guidance on specific environmental taxes, see: