Carbon offset and tax relief

What is this, and is relief available...

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A client is involved in the insurance service industry and has a number of company vehicles provided to staff.  He has (apparently) been advised that if he fits a piece of kit to the vehicles it will somehow reduce their carbon footprint, and provide some sort of measured carbon offset 'credit' for the company.

My understanding of how the whole carbon offset machine works is extremely limited, but I thought this was about businesses buying eco-friendly assets/services that cost buttons in terms of CO2 emissions, and the 'good' credit associated with such things is set against all the bad, heavy-weight CO2 emissions that a business might be involved in, whether due to manufacturing directly, shipping, haulage etc. This is how businesses can say they are low carbon, carbon neutral or negative and so on.    

 If my understanding is broadly correct, then it seems that if the client incurs a cost to somehow increase their carbon offset, this is very similar to them, for example, paying more for a greener delivery firm using electric trucks instead of DPD hauling boxes about in a diesel Ford Transit.  There is an additional cost to the business but by incurring the cost, they increase their carbon offset position.

So, if my client decides to invest in this kit, and it does what it says, can the cost be claimed as an allowable business expense?  At first, I began to think about the wholly and exclusively narrative (s.34 ITTOIA 05 and s.54 CTA 09) and the ancillary benefit rules, but it seems that if they buy this kit for the specific purpose of increasing carbon offset, this is not their business activity.  Then again, farmers buying solar panels to install on giant sheds isn't their business activity either?

I may be barking up the wrong tree with all of this, or maybe the question can be more widely drawn i.e. if a business spends money on anything that helps to reduce its carbon footprint, is there tax relief available?  Unless specifcially relevant here, let's not get into the 'is it revenue or capital' discussion, as I don't have the detail on what exactly is being proposed at this point, and the query here is more on the general principle of costs linked to carbon offsetting.

Replies (11)

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By paul.benny
30th Jan 2024 12:44

The only device I know of to reduce the carbon footprint of existing vehicles is a wheel clamp to stop them being driven.

And whilst that might be an allowable expense, it doesn't get any additional tax credit.

There are schemes for businesses with high energy consumption that allow relief from climate levies if they can demonstrate reduction in consumption over time. As far as I know, these relate to gas and electricity and not road transport fuels.

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Replying to paul.benny:
By ianthetaxman
30th Jan 2024 12:57

Indeed - TBH, this idea reminds me of conspiracy theory type scenarios where a device could be fitted to massively reduce fuel consumption, or the theme of the 1990s film classic Chain Reaction:
https://www.bing.com/ck/a?!&&p=33d854a12fac237eJmltdHM9MTcwNjU3MjgwMCZpZ...

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By Tax is always taxing
30th Jan 2024 13:23

I don't see why it wouldn't be an allowable cost (as in a business expense).
I'm aware of some businesses looking at it up here in Scotland for the ULEZ zones coming in. Think it was around retro fitting the exhaust system etc to reduce emmisions and make fleet compliant - that said, no idea if anyone did it or just updated fleet anyway.
As to carbon offsets - no (based on my limited knowledge)

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Replying to Tax is always taxing:
By ianthetaxman
30th Jan 2024 14:23

I'm located just outside Edinburgh city centre and while I haven't seen anything like this so far, I can certainly see the logic in retro fitting exhaust systems this way - maybe that might be what the client is thinking about.

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Replying to ianthetaxman:
paddle steamer
By DJKL
30th Jan 2024 14:28

Not sure how that will allow you into the zone (when it starts in Edinburgh), how will the cameras know you have the kit installed, I thought they just worked on number plate recognition and a database?

( I have to get rid of one of my cars due to all this, having said that right now I can barely drive to work in Leith from where I live Leith/Trinity given the falling tenement road closure and all the other roads previously closed so not sure worthwhile having a car!!!)

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Replying to DJKL:
By ianthetaxman
30th Jan 2024 15:24

That's a good point on the cameras!

And as for the roads, I use Salamander Street and Ferry Road in Leith when I go in to the office, so I know what you mean about congestion and the state of the roads...

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Replying to ianthetaxman:
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By Tax is always taxing
30th Jan 2024 15:42

You have the car emissions tested at an MOT centre and they update the system so if you are below the limit your registration passes

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Replying to Tax is always taxing:
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By paul.benny
30th Jan 2024 17:12

Not sure that's actually true in respect of ULEZ requirements. They're linked to Euro emissions standards (petrol Euro 4 - made from 2006 onwards, diesel Euro 6- made from 2015 onwards)

Getting a vehicle certified as meeting a higher Euro standard is significantly more complex than a bolt-on device and a visit to an MoT tester.

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Replying to Tax is always taxing:
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By Yossarian
30th Jan 2024 20:39

Tax is always taxing wrote:

You have the car emissions tested at an MOT centre and they update the system so if you are below the limit your registration passes

The emissions testing equipment at MOT stations is not sophisticated or accurate enough to be used for that purpose. It would be like walking into Boots and asking them to perform a heart bypass op.

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Replying to Tax is always taxing:
paddle steamer
By DJKL
30th Jan 2024 14:23

Hate to try that on a modern car, they are so sensitive, you alter one thing, the computer gets in a tiz and switches off/disables multiple functions

There is an episode of "Flipping Bangers" where a Merc's retractable roof, gear change and limp home mode all seemed to be put out of order by one error and linked electronic modules.

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Replying to DJKL:
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By FactChecker
30th Jan 2024 15:53

I feel for the Merc* ... if the wind took my hat and then a passing mugger divested me of my running shoes, I'd be more than a bit miffed if I was prevented from limping home!

[* I'm told by rock bands that Merc now refers to merchandise, not a make of car!]

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