Government looking to Streamline energy efficiency rules for Business.

The Government (HM Treasury) yesterday unveiled  plans to drastically reform the carbon reporting and taxation requirements on UK Businesses. The consultation titled “Reforming the business energy efficiency tax landscape” was published and runs until the 9th November 2015.

Damien Hinds – Exchequer Secretary to the Treasury states within the document: “This Government is also committed to meeting our environmental targets. We will ensure that the UK can meet these cost effectively, taking careful account of the impact of policies, to ensure we are not imposing unnecessary burden on business.

This consultation sets out proposals to reform the landscape in order to deliver a simpler and more stable environment for business. This will reduce administrative costs and improve incentives to invest in energy efficiency”.

Effectively in the UK, businesses have to comply with different tax schemes and different reporting standards, which have been implemented over the years. The following are the areas that the Treasury would like to be simplified:

Taxation, reliefs and financial incentives:

  • The Climate Change Levy (CCC) is a levy on the supply of energy to business and public sector consumers, with an aim to change business behaviour to reduce energy consumption
  • The Carbon Reduction Commitment Energy Efficiency Scheme (CRC) is designed to improve energy efficiency and cut emissions of large energy users in the private and public sector. Participants are required to monitor and report on their energy use, and must buy allowances for every tonne of carbon they emit.
  • Climate Change Agreements (CCAs) work alongside CCL. They have the dual policy aim of mitigating the impact of CCL on energy intensive industry, and delivering energy efficiency improvements at the equivalent to the savings that would have been achieved through CCL.
  • Enhanced Capital Allowances (ECAs) lets businesses set 100% of the cost of certain assets against taxable profits in a single tax year – with an aim to incentivise energy saving equipment installations.
  • Electricity Demand Reduction (EDR) is a pilot scheme from DECC where projects above 50kW are able to bid for funding.

Reporting and Auditing schemes:

  • Energy Savings Opportunity Scheme (ESOS) is a mandatory energy measurement and auditing scheme for approximately 10,000 UK organisations. It is designed to increase industry’s awareness of energy consumption to make it easier to take action to lower their fuel bills (saving money) and thereby reduce carbon emissions.
  • Mandatory Greenhouse Gas (GHG) Reporting allows investors to incorporate emissions, energy and other resource efficiencies into analyses and provide shareholders and other stakeholders with better environmental disclosure.

The plethora of polices has drawn criticism from some in industry that the complexity and overlapping of these, incurs an excessive administrative burden on them, which has meant that costs are spent on the administration that could be better spent on energy efficiency improvements.

The consultations aim is to ideally arrive at one tax method and one reporting method. The consultation suggests the new “framework is likely to be delivered through the prism of ESOS, which   is an EU requirement under the Energy Efficiency Directive”.

There are a number of questions in the consultation that touch upon specifics around the tax changes, the reporting changes and the inclusion of Public sector and the so called third sector (charities) in the requirements.

Stuart Fairlie, Head of Technical at Elmhurst, suggests that “at a high strategic level the consultation paper makes sense and provides a path towards simplification and thereby reducing excessive burden on businesses. However it is clear that this can’t be used as an excuse to water down the current policy goals; the fear is that the current Government have rolled back most of the energy efficiency policies on the domestic front, and this is the start of the roll out to commercial policies. We strongly believe that at the strategic level the UK benefits from strong leadership on energy efficiency policies, we emit less, use less energy, whilst building a better stronger more sustainable economy in the future.”

Elmhurst will be replying to the consultation and we also encourage our members to do likewise. We will keep our members informed of our response.

https://www.gov.uk/government/news/government-welcomes-views-on-how-to-simplify-energy-taxes-for-businesses

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