First, there are tax breaks to stimulate the use of "green" equipment for things like heating, refrigeration and display cabinets. Although your firm may not need all this equipment, you could include these assets in specifications for others, or be involved with a client who does use the equipment, so it's worth knowing what qualifies.
These enhanced capital allowances for spending on specific energy-saving plant and equipment were introduced in 2001 as part of the climate change package to encourage investment in more environment-friendly assets. It means that 100% of the expenditure is eligible for tax relief in the year of acquisition, as opposed to the 40% tax relief you normally get in the first year. Clearly, this is a welcome boost to cash flow.
Earlier this year, those who lease relevant equipment were able to claim tax breaks on qualifying energy-saving assets such as heat pumps, radiant and warm air heaters, solar heaters and energy-efficient refrigeration equipment, including display cabinets and compressor equipment.
Buying greener cars can also bring financial rewards as all businesses can claim 100% enhanced capital allowances on cars that emit no more than 120 g/km of carbon dioxide and for vehicle refuelling infrastructure for compressed natural gas or hydrogen fuel. The Smart car meets these criteria. The car must be registered after 16 April 2002 and the allowance will be available until 31 March 2008. This tax break on green cars is generous, as the normal rate of tax relief for businesses buying cars is only 25%.
You should also remember changes in stamp duty. For all documents executed now, transfers of goodwill are exempt from stamp duty. Measures are also in place to aid disadvantaged areas by abolishing stamp duty on all non-residential property transfers in these localities. Both can save a lot of money.
Measures are in place to aid disadvantaged areas by abolishing stamp duty on all non-residential property transfers in these localities
A VAT rate of only 5% has been extended to cover types of conversions and renovations. These include conversion of non-residential property into care homes (or other qualifying buildings used solely for a "relevant residential" purpose). Also benefiting from the 5% rate is the conversion of property into multiple-occupancy dwellings and the renovation or change of buildings into care homes and multiple occupancy dwellings if they have been empty for at least three years. Certain types of heating equipment qualify for the 5% rate where it is installed in the homes of people who qualify for particular government or local authority grants.
This favourable VAT rate similarly applies to the cost of installing certain heating equipment, such as factory-insulated hot water tanks and micro combined-heat-and-power systems. Heating systems using renewable energy also qualify, as do schemes funded by government grants and local authority schemes in the homes of less well-off people and those aged over 60.
A very generous 150% tax relief is available on the costs of remedying contaminated land and this can be claimed by, for example, builders and property developers. Qualifying improvements include developments by property investment companies and housing associations, as well as companies building accommodation for their own use (for example, a trading company building factory premises for its own production). Don't forget that the standard rate of landfill tax has risen from £12 to £13 a tonne as part of the annual increase in the tax from 2000 to 2004.
Businesses renovating or converting vacant or underused space to provide flats above shops and other commercial premises can benefit from 100% capital allowances in the first year. The tax break is aimed at properties in traditional shopping areas, but bear in mind that a number of conditions apply.
Finally, don't forget that 100% first-year allowances are available for small businesses investing in communication and IT. This tax break ends on 31 March 2003.
Nick Antoniou is a partner at Smith & Williamson Chartered Accountants, specialising in business services. Email: email@example.com.