Budget Comment 2009

Developments on the green horizon

The Government continues to be keen to show support for environmentally friendly measures in a bid to meet the Kyoto climate change agreement and its successor which is to be negotiated later this year. A variety of tax measures were announced in the Budget to work towards these goals.

Enhanced Capital Allowances

The current Enhanced Capital Allowance (ECA) scheme gives businesses 100% relief for expenditure on certain environmentally beneficial assets. This enhanced relief is currently available for expenditure in the following areas where it is specified in lists issued on www.eca.gov.uk at the date the expenditure is incurred:

• energy-saving plant and machinery
• low carbon dioxide emission cars and natural gas and hydrogen refuelling infrastructure
• water conservation plant and machinery

Each year the list of qualifying technologies is reviewed and this year uninterruptible power supplies, air to water heat pumps and close control air conditioning are to be included. Three existing technologies included on the approved list will be removed.

The date that these changes will take effect will be appointed by the Treasury before the summer recess commences on 22 July 2009.

Landfill tax

The recent decision in the Waste Recovery Group case highlighted deficiencies within the existing legislation. The appellant was successful in arguing that certain transactions on a landfill site did not represent a taxable event and therefore fell outside the scope of the tax. As a result the Chancellor announced changes to clarify when use of material on a landfill site will be regarded as a taxable disposal. These changes will come into effect from 1 September 2009.

The Chancellor also announced a wide-ranging review of the Landfill Tax legislation. The Government regard the tax as being highly successful in reducing the amount of waste which goes into landfill. However since its introduction in 1996, there have been significant changes in landfill industry practice and EU environmental regulations. There have also been a number of cases which challenged some of its fundamental concepts. As a result of these developments, the Government feels that this is an appropriate time to review the basis of the tax.

With that in mind, HM Revenue & Customs (HMRC) has issued a consultation document and has requested comments by 24 July 2009. The intention is that the amendments to the legislation will be included in the Finance Bill 2010 and will come into effect sometime after that.

Climate change levy

The Budget package included three climate change levy (CCL) measures.

Businesses in energy intensive sectors can agree Climate Change Agreements (CCA) with the Department of Energy and Climate Change (DECC). These agreements provide relief from CCL in return for making reductions in energy use and/or emissions. A restricted entitlement to claim this relief is being introduced for businesses manufacturing certain plastic products. The DECC will lay regulations after the Finance Bill 2009 receives Royal Assent which will allow businesses in the plastics sector to enter into a CCA with DECC.

A new measure is being introduced which will allow HMRC to recover relief granted to a business which fails to meet its targets under a CCA, and is in a sector that fails to meet its sector target for the same period. Any recovery would be proportionate to the extent that a business had failed to meet its target(s). This measure will apply to CCA certification periods starting on or after 1 April 2009.

Finally, a new measure will introduced to make supplies of low value solid fuel valued at no more than £15 per tonne subject to CCL. This measure will have effect for relevant supplies made on or after 1 January 2010.