With the COP26 summit only days away, it was easy to imagine there might have been headline ‘green’ tax announcements in line with the government’s environmental strategy. The measures that were announced focussed more on green spending rather than green taxation and build on those set out earlier this month as part of the Net Zero strategy to ‘build back greener’. 

In relation to the tax changes that were announced for some, such as the reduction of 50% to Air Passenger Duty (APD) rates for domestic flights from 1 April 2023, the freezes in fuel duty, Aggregates Levy rate and Carbon Price Support rates, it could be argued that they go against the green agenda but these were set out as a response to the current economic situation. The reduction in domestic APD will also be accompanied by a new rate of APD on ‘ultra-long haul’ flights (flights of 5,500 miles or more) on the basis that these flights are more polluting so the duty should be higher

Plastic Packaging Tax

The government is also pressing ahead with the Plastic Packaging Tax rules (to be introduced from 1 April 2022) and has made some amendments to the rules refining the meaning of a ‘plastic packaging component’ to ensure the tax is properly targeted and captures businesses that manufacture or import plastic packaging. Businesses need to consider whether they are affected by this new tax to ensure they have time to adopt appropriate systems and controls. 

Business Rate Relief

The government also announced business rate exemptions and relief in England for eligible green technologies to support the decarbonisation of non-domestic buildings. From 2023, they will be added to by exemptions for eligible plant and machinery used in onsite renewable energy generation and storage, and a new 100% relief for eligible heat networks. 

Among the significant government funding announced to ‘build back greener’ are investments to improve infrastructure for electric vehicles (charging points), public transport and funding for zero emission buses. The government’s green financing programme has also recently come to fruition and the government has now issued two sovereign green bonds. In addition, the retail Green Savings Bonds have recently been made available via NS&I allowing UK savers to support the government’s green spending initiatives. 

Although there was little in the way of green tax announcements, the spending measures demonstrate the intent of reaching a net zero carbon position by 2050 by investing in green technologies and infrastructure and rewarding others for investing in the same.

Get in touch

If you have any queries on the topics covered above, please contact David Nelson, partner, KPMG in Belfast.