One way to benefit from NetZero is to take advantage of the UK Chancellor’s latest Covid-19 recovery budget that has great money saving benefits for smaller businesses, specifically around energy spending.
One of the key benefits in the Chancellor's budget is the new super-deduction allowance which may be of great financial benefit to many SMEs that want to cut energy costs and become more sustainable. In other words, being green may be a great financial and commercial decision, not just a political statement.
How can a small business benefit from the new budget and NetZero goals?
The new Chancellor's budget has a number of SME and small business targeted incentives and support measures. The government is very keen to promote and support NetZero objectives. For example, the Help to Grow scheme, provides digital, management and training tools for small businesses. If your business is making less than £250,000 in profits, it will not be taxed at the full rate when the corporation tax goes up to 25% in 2023. The government has also extended the Coronavirus Job Retention Scheme until September, 2021.
The new super deduction allowance gives businesses a capital allowance of 130% for investments in new plant and machinery rather than the typical 18% ‘main rate’ capital allowances. In addition, the new budget provides for a 50% allowance on plant and machinery vs the standard 6% ‘special rate’. In practice, these new policies mean that your company can lower its tax bills by up to 25p per £1 that your business invests. ‘Plant and machinery’ has a broad definition. We suggest that you reach out to your accountants to make sure your business takes full advantage of this very good incentive.
Many small businesses want to be energy efficient, but often find costs to be prohibitive. Now, when you invest in energy efficiency and/or building solar panels/or wind turbines, your business may actually have a great business plan. The super-deduction allowance will allow you to deduct up to 50% of your investment costs from any profits that you generate. For example, if you install a solar panel or a wind turbine and then make profit on that solar panel, you can deduct up to 50% from your profits.
In addition, if you invest in electrical vehicle charge points or other energy-saving equipment that is on the energy technology product list, you can also claim the super-deduction allowance. In practice, all of this means, that if you were thinking about energy savings investments, and businesses, now is a great time to revisit your financial models. The government is certainly trying to make energy efficiency a profitable undertaking.
What are the benefits of energy efficiency for small businesses?
Think about energy efficiency as an investment, rather than an expense. The energy market is undergoing a fundamental transformation. Most businesses in the future will be both consumers and producers of energy. That means that your business can make money in the new net zero energy economy. The government is now playing an ‘accelerator' role by promoting clean and renewable energy as an investment. This is different from ‘guaranteed feed in tariffs' of the past, where large companies were guaranteed specific energy rates.
This time, the focus is on helping small businesses to build their own renewable and green energy footprint across businesses. For example, electric vehicles and charge points will be increasingly seen around many parking lots.
De-centralised energy is a big theme for the future. Instead of relying on the expensive central grid, many businesses are now in a great position to generate their own on-site energy. The super-deduction and other provisions makes a fantastic use case for many businesses. Most of the energy efficiency investments will not only cut your energy bills, but may add to the top line of your business.
The super-deduction allowance is in operation between 1st April 2021 and 31st March 2023. It is a great time to consider all those energy efficiency projects you thought were not affordable!