Incentivising sustainable business practices for SMEs

It’s Clean Air Day this week, so the focus of the business community is on adopting green practices to become more sustainable – but cost is always a concern.  

When implementing new working practices or benefits, you’ll need to plan carefully around existing cash flow strategies, as sustainable schemes aren’t always optimised for cost-effectiveness.  

Thankfully, there are a number of nationwide schemes available to businesses looking to become greener without sacrificing their ability to grow, invest and succeed.  

Enhanced capital allowances 

You may already claim capital allowances on taxable profits to reduce your overall Corporation Tax bill – but did you know that you can claim enhanced allowances on energy and water-efficient equipment? 

The Enhanced Capital Allowance (ECA) scheme allows you to claim a 100 per cent first-year capital allowance on qualifying equipment, such as: 

• Electric cars and zero-emissions cars 

• EV charging equipment 

• Zero-emissions goods vehicles 

• Sector-specialist equipment such as biogas and hydrogen refuelling equipment. 

This is in addition to your existing Annual Investment Allowance (AIA) limit of £1 million, as long as you do not claim both for the same expenditure. 

When investing in sustainable technologies, your business can write off the whole cost of an investment against its taxable profits in the year the purchase was made. 

Climate change agreements 

Climate change agreements (CCAs) are voluntary agreements made between operators in industrial sectors and the Environment Agency.  

A CCA requires the business to report its energy use and carbon emissions in comparison to agreed targets.  

In return, the operator is given a significant discount on the Climate Change Levy (CCL) – a tax charged on the energy that your business uses. 

This may be particularly suitable for your business if you operate in an energy-intensive sector such as manufacturing.  

Cycle to work schemes 

If you want to get your team involved in going green, then a cycle to work scheme might be right for your business.  

The cycle to work scheme is a tax-exempt benefit where employers can loan bicycles and cycling safety equipment to employees. 

This initiative aims to encourage more environmentally friendly and healthy modes of transport and may be most suitable to locally operating SMEs where staff live within cycling distance.  

Taxes on unsustainable activities 

In addition to available incentives, your green goals may help you avoid additional taxes or levies.  

For example, if you get rid of business waste at a landfill site, you may need to pay Landfill Tax. There are two rates, one for ‘inactive’ waste (such as soil), of £3.30 per tonne, and the standard rate of £103.70 per tonne.  

It is also possible to claim tax credits on Landfill Tax if you send waste from landfill to be recycled or reused. 

Whether you’re looking to extend existing sustainability measures or adopt them from scratch, it’s always worth investigating what tax reliefs are available to you.  

They can make these processes more cost-effective and open the door to SMEs becoming greener without suffering cash flow issues.  

For tailored support with embracing green initiatives and available tax reliefs, please contact our team to discuss your needs.