Spring Statement - environmental tax comments

Mar 13, 2019

The Chancellor said the government wants to tackle the environmental challenges that threaten our future and build sustainability into the heart of the economy. So how did he do?

Commenting on the environmental tax announcements, Jayne Harrold, PwC’s UK environmental tax leader, said:

“On transport, there’s to be a call for evidence on whether passenger carriers should be required to offer genuinely additional carbon offsets to passengers to make their journey carbon neutral.  The use of “non-compliance” credits or “Voluntary Emissions Reductions” (“VER”) is probably driving the call for evidence.  Back in 2010, HMRC issued a brief on the VAT treatment of these certificates and concluded that they were outside the scope of VAT because they are “essentially just a promise that carbon has been, or may be, reduced somewhere in the world". There may be a general benefit to the reputation of a business in paying for VER, but no particular service is rendered, which can be identified as a cost component of the business. There is thus no consumption.

“There is to be support for small and medium sized business in improving their energy efficiency, reducing their emissions and their energy bills, which is good news for all and a welcome helping hand for small businesses.

“The call for evidence on greening the gas grid is particularly welcome.  There’s been a growing market in green gas being injected into the grid for a number of years.  The country is currently gas dependent so reducing the carbon impact of the gas grid is an effective way of reducing emissions using existing infrastructure.  One way in which the Chancellor could help to tip the balance on the economics of green gas is to introduce a climate change levy exemption for green gas consumption, much like the old renewable electricity exemption which was withdrawn in 2015.  Tax measures can be helpful in shifting the economics and promoting environmentally desirable outcomes, even if they are only needed to shift the market for a short term period.

“Continuing with the energy theme, and with the objective of ensuring consumer energy bills are low and homes are better for the environment, there is to be a Future Homes Standard so that new homes are future-proofed with low carbon heating and world leading levels of energy efficiency.

“There is to be an environmental bill to mandate biodiversity net gain and ensure that infrastructure developments are not at the expense of biodiversity, and the UK is to launch a global review of the link between biodiversity and economic growth.

“As pre-announced, the Aggregates Levy is to be reviewed in terms of both its effectiveness in meeting its objectives of reducing the amount of primary aggregate extracted, and devolution to Scotland.

“Considering this was the “sandwich filling” between Brexit votes, and not much was expected from the Spring Statement, the Chancellor has delivered good news for both the environment and business and consumers.  This is one of the strongest environmentally themed Budgets or Statements I’ve seen for a while.”

 

About PwC

At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 158 countries with over 250,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

© 2019 PwC. All rights reserved

Contact us

Sian Gentle

Manager, media relations, PwC United Kingdom

Tel: +44 (0)7715 484 884

Follow us