Tax credits for loss-making businesses investing in efficient energy and water.

Legislation will be introduced in the Finance Bill 2017/18 to amend schedule A1 to the Capital Allowances Act 2001. It would allow loss-making UK businesses to claim a first-year tax credit (FYTCs) when they invest in products that feature on the act’s energy technology and water technology lists. The rate of claim will be set at two-thirds of the corporation tax (CT) rate, in line with the original policy intention. The scheme will expire on 31 March 2023.

The first-year allowance (FYA) allows profit-making businesses to deduct the full cost of investments in energy and water technology from their taxable profits. Because loss-making businesses do not make profits, they cannot claim the FYA tax breaks.

FYTC provides relief for loss-making businesses that purchase efficient technology supported by the energy and water schemes. The schemes mitigate the barrier of high purchase costs where the efficiency of a product can provide savings to businesses and wider environmental benefits. The schemes aim to reduce the consumption of energy by business by encouraging their investment in the most efficient plant and machinery. This can lead to a reduction in overall energy costs and carbon emissions, and help the UK to meet its carbon reduction obligations.

Article from ACCA In Practice