Firms 'need joined-up incentives to go green'

The Chancellor must go beyond ‘green speak’ and gimmicks in next month’s Budget and introduce joined-up tax incentives that boost both supply and demand of greener goods, says accountancy firm PKF.

‘We already have a number of tax incentives for the purchase of green products – although there are some notable gaps – but we do not have a holistic approach that truly encourages manufacturers to switch to the green economy,’ said tax partner Peter Harrup.
 
He went on: ‘With businesses prepared to take radical steps to survive, the Government has a rare chance to make a step change to a greener economy. Some businesses may be able to use their down-time to retool so that they can make greener products, but most will be reluctant to invest without incentives’.
 
Businesses aiming for an environmentally friendly approach can claim tax relief on research and development expenditure: 130% of costs for large companies and 175% for small and medium enterprises.

Only the standard capital allowances are available, however, for businesses investing in new plant and production lines to make more efficient vehicles, machinery and consumer products.
 
‘The tax reliefs for vehicles are a good example of the current patchy approach,’ said Mr Harrup.

‘Business purchases of low emission cars can qualify for 100% first-year capital allowances, but there are no corresponding reliefs for buying low-emission vans and trucks.

‘There are also no special allowances or incentives for the few remaining vehicle manufacturers in the UK to retool to produce lower emission vehicles – yet, with many plants temporarily closed, this could be an ideal time to update the production lines to make greener vehicles.’
 
EU state-aid rules often delay the implementation of tax incentives, claimed Mr Harrup, who added that ‘investment to switch to making greener products is needed now.

‘The Government should press the EU to exempt green incentives for manufacturers from state-aid legislation – at least until we are out of the recession.’

Categories: News , Budget 2009 , green , PKF