Consider tax breaks to reduce energy bills, firms advised

Lancashire manufacturing businesses should consider using tax breaks to help them reduce rising energy costs, according to a business advisor.

Business secretary Vince Cable recently warned that rising domestic energy costs could derail a marked increase in Britain’s manufacturing activity, with British firms paying up to 30 per cent more for energy than their European counterparts.

Ginni Cooper, head of the manufacturing team at Lancashire-based Moore and Smalley, believes businesses are unaware that they could reduce energy costs by taking advantage of generous tax breaks available for investments in more ‘eco-friendly’ plant and machinery.

She said: “Energy prices are largely out of the control of individual manufacturers, meaning they must focus instead on factors they can control to bring costs down, such as investing in energy saving equipment.

“The government’s Enhanced Capital Allowances (ECA) Scheme exists to enable businesses to write off the capital cost of purchasing ‘greener’ plant and machinery, such as energy-saving boilers and motors, against their taxable profits. This offers a clear incentive for businesses replacing plant and machinery to go for the greener option, as opposed to just going for the cheapest option.”

Businesses can claim a 100 per cent first year capital allowance on investments in certain energy saving equipment against the taxable profits of the period of investment. So for every £10,000 spent on qualifying equipment, businesses could reduce their tax bill in the year of purchase by over £2,000.

The technology that qualifies for the ECA Scheme is listed on the government’s Energy Technology Product List.

As well as contributing to lower energy bills and better cashflow, additional benefits might include a reduction in Climate Change Levy or CRC payment.