Green measures in Chancellor Jeremy Hunt's 2023 Autumn Statementby
Mark Simpson rounds up the main green initiatives in Chancellor Jeremy Hunt's 2023 Autumn Statement.
The Autumn Statement took place in the context of the Government’s recent announcements of the delays to the ban on the sale of petrol and diesel cars and the phasing out of gas boilers and the expansion of North Sea oil and gas exploration. There was therefore interest in whether fiscal changes would be introduced to reflect this apparent deprioritisation of the green agenda.
Main changes to green tax areas and the impact of the Autumn Statement
Perhaps the most far-reaching environmental development announced was the Green Industries Growth Accelerator. This represents £4.5 billion of investment into sectors including:
- £2 billion to the automotive sector to support the development and manufacture of zero-emission vehicles
- £975 million to the aerospace industry to assist with development of energy-efficient and zero-carbon aircraft technology.
- £960 million to ‘green’ industries to support a strong clean energy manufacturing capacity in the areas of carbon capture and storage, hydrogen, offshore wind, electricity networks and nuclear power.
- £520 million to life sciences to build resilience for future health emergencies and to build on the sector’s record for innovative research and development.
Climate change levy
The freeze on current rates and the reductions due in April 2025 were confirmed. A new 6-year climate change agreement scheme will run from 2025 to 2030.
Enhanced capital allowances on energy-efficient items
The introduction of full expensing for most plant and machinery expenditure has led to the general withdrawal of targeted tax reliefs, although the 100% enhanced allowance for zero-emission vehicles will still be important given the exclusion of other cars from full expensing.
VAT zero-rating of energy-saving materials
This is extended to cover items installed in buildings used for a relevant charitable purpose and also to cover specified additional technologies.
Electricity Generator Levy
Receipts from non-fossil fuel electricity generation projects where the substantive decision to proceed is made on or after 22 November 2023 will be exempt from the levy.
Research & Development tax reliefs
Oddly, probably the most far-reaching tax change announced in the Statement was not specific to green industries, being the reform to the research and development tax relief system, which almost by definition is highly relevant to the low-carbon manufacturing sector.
From 1 April 2024, the current RDEC and SME schemes will be merged. This will give users of the RDEC scheme the advantage that the notional tax rate of loss-making companies will be reduced from 25% to 19%.
With regard to the recently introduced R&D Intensive Scheme, the threshold for the proportion of R&D activity will be reduced from 40% to 30%, again from 1 April 2024. Companies which have previously qualified for this scheme will also be allowed a one-year grace period for which they do not meet the criteria without becoming ineligible for the scheme, which offers a tax credit rate of 14.5% as opposed to the standard 10%.
Other Green measures
Most of the ‘green’ interest in the Statement did not relate so much to tax issues as to other encouragements to investment in energy-efficient and low-carbon technology. The following measures were announced or confirmed:
Reforms to the planning system to prioritise the rollout of electric vehicle charging points and hubs and to introduce an extension to the designation of nationally significant low-carbon energy projects, which are given priority under the planning system. There will also be a consultation on ending the blanket ban on the installation of heat pumps within one metre of a property boundary.
There will also be reforms to the grid connection process, intended to cut waiting times for low-carbon energy suppliers from 5 years on average to 6 months.
The Industrial Energy Transformation Fund will be given additional funding of £185 million to support industrial sites investing in energy-efficient and low-carbon technology.
What is not changing?
There were no new announcements for the following areas, previously announced rates were confirmed or unchanged.
- Benefit in kind percentages for low-emission cars
- Vehicle excise duty rates for low-emission vehicles
- Business rates exemptions
- Land remediation relief
- Plastic packaging tax
Visit our dedicated Autumn Statement 2023 hub here to find all related articles from our experts.
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