The Chancellor has announced a number of changes which the Government maintain reaffirms its commitment to meeting its target of reducing carbon emissions by 60% by 2050. Indeed he announced a desire to voluntarily reduce these emissions by 80% by the same year.
The major changes are as follows:
Car Benefit Tax
Company car tax is calculated by applying a percentage to the list price of the car. The percentage is related to the CO2 emissions of the car and ranges from 15% to 35% in 1 per cent increments for a petrol car. Most diesel cars attract a 3% supplement on petrol percentages but subject to the same 35% cap.
The 15% rate is based on 135 grammes of CO2 for 2008-09 and 2009-10.
The new measure is a new rate of 10% on cars emitting 120 grammes or less effective from 6 April 2008. (13% for most diesels)
Fuel Duty
Main road fuel duty rates will rise by 2% on 1 October 2008 increasing by 1.84% on 1 April 2009 and will increase by 0.5% per litre above inflation on 1 April 2010
Vehicle Excise Duty
The Government announced a long-term target to reduce new car CO2 emissions to 100g/km by 2020. There is a stated desire to strengthen the environmental incentive to develop and purchase fuel efficient cars.
A reform of the Vehicle Excise Duty structure has been announced. From 2009 VED will be restructured to create six new bands including a top band for most polluting cars emitting 255g CO2/km. The standard rate in 2009-10 will be reduced for all new and existing cars emitting 150g CO2 /km or less.From 2010-11 the zero rate during first year of ownership will be extended to all new cars that emit 130g or less and conversely for the most polluting cars above 160g CO2/km a first year rate of £950 in 2010-11 will apply
Capital Allowances
Investment in environmentally friendly assets continues to attract enhanced rates of relief. This will be particularly important since small and medium sized enterprises will lose their first year allowances, with only the first £50,000 of expenditure attracting relief on most plant and machinery under the new annual investment allowance. In particular, the following additional incentives have been announced in the Budget:
• 100% first year allowance on expenditure on natural gas and hydrogen refuelling equipment will be extended for an additional five years to 31 March 2013, and will also include refuelling equipment for biogas;
• 100% first year allowances for expenditure on low CO2 emission cars will also be extended to 31 March 2013 – but only cars with emissions not exceeding 110g/km driven will attract the 100% relief;
• Energy efficient and water saving equipment on lists published by Defra will attract 100% relief. Water waste recovery and reuse systems will be added to the Water Technology List and compressed air master controllers, compressed air flow controllers, heat pump dehumidifiers and white LED lighting will be added to the energy efficient list, thius expanding the categories that attract relief at 100%.
Loss making companies (but not unincorporated businesses) will also be able to surrender tax losses arising from capital allowances on energy efficient and environmentally friendly equipment which appears on the lists published by Defra. This ‘first year tax credit’ will be paid at 19% of the loss surrendered, subject to an upper limit of the greater of the company’s PAYE and NI liabilities for the period or £250,000.
However, thermal insulation of buildings (other than residential property) will only attract relief at 10% instead of the current 25% relief for industrial buildings. That said, thermal insulation in property that did not qualify for industrial buildings allowances (such as offices and shops) will be advantaged.
Zero Carbon Homes
The Government confirmed its ambition to have all new homes zero carbon homes by 2016 and in this vein has announced that it will extend stamp duty land tax exemption to new zero carbon flats retrospectively from 1 October 2007.
Aviation Taxes
The intention to change Air Passenger Duty to a 'Per Plane Duty' was confirmed to take place on 1 November 2009. This was announced last year to send a better environmental signal and more closely relate the tax to the number of planes emitting CO2.
It announced today that it will increase the forecast total revenue from aviation duty by 10% in 2011-12 the second full year of operation of the new duty.
Plastic Bags
The Government has announced that it is committed to ease the carbon emmission problems deriving from the manufacture and supply of plastic bags, not to mention the landfill issues which arise from the disposal of used bags.
They intend to eliminate single-use carrier bags by imposing a tax charge but have stopped sort on doing so on the grounds that they will allow retailers the time to take voluntary action. If such action is not taken the tax will be introduced and the stated objective is that the charge whether made by the retailer or the Government will go to environmental charities.
In today's world climate change and the environment are increasingly at the forefront of the political agenda, and it is no surprise to see many of these measures being proposed. Whether fiscal policy in itself is enough to encourage behavioural change is debatable, but it will certainly be an influencing factor in many people's decision making process. What remains to be seen is whether large business will embrace these changes or react against them, as in Porsche's decision to take the Mayor of London's Congestion Charge changes to Judicial Review.
