Innovative Energy Consultancy Ltd
Innovative Energy Consultancy Ltd

Business energy tax – what you need to know

You may be aware that the Government has announced its plans to abolish the Carbon Reduction Commitment Scheme (CRC) from April 2019. It is part of an overall plan to simplify the regulatory system whilst helping the UK to achieve its targets to reduce carbon emissions.

The CRC Scheme will close following the last compliance year to 2018/19. The last CRC annual reports will be due for submission by the end of July 2019 and the last pre-defined allowance surrender date will be October 2019.

What difference will abolishing the CRC make?

With the closing of the scheme, the Government will need to recoup its revenue through an alternative taxation. The plan is to increase the Climate Change Levy tax which applies to all businesses. This means that most businesses will find their energy costs increase, so it’s even more important now to find ways to become more energy efficient.

Energy efficiency measures will help you to reduce the impact of the tax increase on your business but it’s rare they can be implemented overnight. While the tax change won’t come into effect until 2019, energy efficiency is an issue which businesses should address without delay.

As well as reducing consumption, you should also find out if your business is eligible to join the Climate Change Agreement Scheme. This scheme has been in place since 2001 and allows some businesses to claim a significant rebate by reducing their energy consumption and by meeting agreed energy reduction targets, thereby neutralising the impact of the new tax regime.

For businesses which hold a CCA, the CCL is reduced by:

• 90% on electricity bills, increasing to 92% in 2019
• 65% on other fuels, increasing to 78% in 2019

What can be done to mitigate the impact?

It all comes down to using as little energy as possible. By reducing consumption your business will keep energy bills to a minimum and reduce its tax liability. Energy efficiency measures can range from changes to lighting and heating through to improvements in business process to reduce wastage.

You should also investigate whether your business is eligible for the Climate Change Agreement Scheme allowing you to claim rebates in return for meeting targets based on reduced consumption. At IEC will specialise in managing CCAs for eligible organisations by handling everything from the CCA Application Process through to the day to day management of the scheme on behalf of our clients.

We work with a number of manufacturing and service-based companies to help them to reduce energy consumption and improve efficiency for the long-term. For more information on our business energy efficiency consultancy service, please click here.

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