Simplifying the business tax energy efficiency landscape
UK businesses are encouraged to operate in a more environmentally-friendly way by a number of policies encompassing tax, regulation and voluntary schemes. They aim to encourage the uptake of energy efficiency and low carbon measures while improving business productivity and supporting growth. Among these, the Climate Change Levy (CCL), which was introduced in 2001, is levied on the supply of energy to business and public sector consumers and aims to incentivise businesses to reduced energy consumption.
However, the multitude of policies in this space has created a complex landscape of often overlapping programmes. Businesses have highlighted that this complexity has made the policies administratively burdensome and costly to comply with. Conscious of these challenges, and willing to improve the productivity of UK businesses, HM Treasury launched a consultation last month on reforming the business tax energy efficiency landscape. The consultation contains proposals to streamline the UK's corporate carbon reporting and taxation landscape, raising the prospect of a major revamp of non-domestic green policies.
Energy UK is supportive of HM Treasury’s proposal to move away from the current system of overlapping policies towards a system where a single organisation faces one energy efficiency-related tax and one reporting scheme related to emissions from energy use. The reforms should see a tax system that is efficient, easy to administer, has clear objectives and is consistent with other policies and the broader context of the UK’s approach to energy and climate change. With this in mind, Energy UK would welcome a new tax based on a CCL-type model with a single tax rate.
You can read Energy UK's consultation response online. The outcome of the consultation will be shared after the Spending Review.