Green Taxes

As environmental issues have become ever more important in the political arena, the concept of ‘green taxes’ has emerged. Increasingly, concerns about climate change have begun to inform tax policy.

In the December Pre-Budget Report, ‘green’ tax measures included raising the rate of duty on road fuels and on air travel, and from 1 May 2007 the VAT fuel scale for company cars will reflect the car’s carbon dioxide emissions.

The Landlord’s Energy Saving Allowance, previously available only to individuals, will also apply to corporate landlords who let residential properties and will be available up to 2015. Floor insulation will be added to the energy saving items which qualify for the allowance. The maximum deduction of £1,500 will be available per property, rather than per building.

Although the expanded allowance will apply to both corporate and individual landlords, the changes for individuals take effect for expenditure on or after 6 April 2007, while the extension to corporate landlords will apply only to expenditure incurred on or after state aid approval is received.

The Finance Bill 2007 will include legislation exempting from income tax any sums received on or after 6 April 2007 by a householder from the sale of surplus power from microgeneration technology installed in their home, so long as that sale is not in the course of a trade.

There were further green measures announced in this Budget:

Stamp Duty Land Tax: Relief for new zero carbon homes

The Chancellor announced a relief from Stamp Duty Land Tax (SDLT) for new zero carbon homes. The measure will have effect from 1 October 2007 and will be time limited for five years, expiring on 30 September 2012.

New homes which are certified carbon neutral will qualify, and there will be no SDLT liability for homes with a purchase price of up to £500,000. Where the purchase price exceeds £500,000 the SDLT liability will be reduced by £15,000.

Relief will not be available on second and subsequent sales, nor on existing homes. New homes are defined as those dwellings first occupied for residential purposes at the time of the transaction giving rise to the SDLT charge.

Landfill tax

The standard rate of landfill tax will increase from £21 per tonne to £24 per tonne from 1 April 2007, then to £32 per tonne from 1 April 2008. The lower rate will increase from £2 per tonne to £2.50 per tonne with effect from 1 April 2008.

From 1 April 2007 the maximum credit that landfill site operators may claim against their annual landfill tax liability, for contributions made to bodies with objects concerned with the environment, enrolled under the LCF, will be changed from 6.7% to 6.6%.

Travel taxes

As reported elsewhere in this Report, Vehicle Excise Duty rates in bands C to G rise, with duty for cars in band G rising to £300 with effect from 22 March 2007. Duty for band G will rise to £400 in 2008.