Tax treatment of Carbon Offset Credits

Tax treatment of Carbon Offset Credits

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HI Guys

A Client of ours, telecoms industry, recently purchased approx £20,000 of Carbon Offset Credits (Voluntary VER Credits).

He was told that he can offset this cost against Corporation tax by the broker.

My reading on these is that they would be shown as an intangible asset in the Companies Balance sheet and we would treat them as writing down an investment.

Does anyone have any experience on how to handle such investments??

Many thanks

Replies (4)

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By thisistibi
01st Aug 2012 08:57

Yes

They aren't an investment.  They are revenue expenditure.

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Teignmouth
By Paul Scholes
01st Aug 2012 09:40

Image

At the moment most purchases of VER type credits are for the purposes of a company's marketing, PR or CSR image and so can be classified as such.  

Whilst it is an intangible, my own view is that unless it's part of a separately identifiable project to create a brand or market presence I'd tend to write it off in the year rather than show it as an intangible to be amortised.

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Replying to Ruddles:
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By simonmercer
06th Aug 2012 13:10

Thanks for the reply. My issue with this is that these credits can be traded - thus there is a perceived residual value.

If you assume that a value is never going to be realised then w/o in the year is fine, but what if they have a value at the end of that year, albeit significantly less than the purchase price.

Do we task the Directors to obtain a valuation on the basis of them being traded at the end of the f-year? At least that way - if they are worthless the w/off can has extra justification?

SM

 

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Teignmouth
By Paul Scholes
06th Aug 2012 14:38

How easily?

My understanding was that the market for VER credits is still in its infancy and so I'm not sure how marketable they actually are at the moment.

If however they were bought primarily for their investment or trading potential, rather than as something to stick on their marketing literature, then, if the clients are happy there's a ready market, you may have to re-think this, eg either as an investment being valued each year or even (if they are going to make a habit of it) stock, again with a NRV consideration at the year end.

If this was my client, I'd convince them to write it off!

 

 

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