The firm has suggested that the poor take-up rate is due to a lack of awareness about the tax breaks, and because businesses must go through a complex application process in order to secure the tax benefits.

The research study, entitled 'Environment and the Corporate Agenda' was conducted by Bristol Business School, part of the University of the West of England, and polled the views of over 100 Finance Directors, predominantly from small to mid-tier businesses across the UK.

The main aim of the survey was to establish the level of awareness amongst FDs of Enhanced Capital Allowances (ECAs), and to find out whether they took advantage of them.

ECAs were introduced in 2001 as part of the Climate Change Levy package, to encourage more businesses to assess the environmental impact of their operations. Under the scheme, businesses are able to claim 100% first year capital allowances on approved environmentally-friendly expenditure, such as the purchase of energy efficient equipment.

Surprisingly, given the high profile of environmental issues over recent years, less than 50% of businesses were aware that the allowances existed. More respondents were aware of allowances for thermal insulation (45%), than for allowances on plant and machinery (36%). Only 14% were aware of allowances on the decontamination of land.

Of those businesses who were aware of ECAs but had failed to take advantage of them, 13% stated that they had been discouraged from applying because the process was 'too complex'; others (50%) believed that the allowances were 'not relevant', whilst some (37%) stated that this type of investment was 'not a priority for their business'.

The research team at Bristol Business School found that these findings mirrored those provided by HM Revenue & Customs (HMRC). Indeed, these official figures suggest the number of companies applying for the allowances is well below 1%.

Mike Lea, Partner at Smith & Williamson, observed that: "The research has confirmed what we had suspected; there is a worrying lack of awareness of the green tax breaks available, but also a poor number of businesses taking advantage of them. There seems to be a sizeable information gap and lack of clarity around the ECAs. This is something that needs to be addressed both by businesses and the Government."

He added: "Both the present Government and the Opposition have put the green agenda and the simplification of tax structures high on their list of policy priorities. Rather than using tax as punitive measure to encourage companies to be more green, they should actively promote green tax incentives and make applying for them as simple as possible for time-poor small to mid-tier businesses. By not taking up such allowances, businesses are also missing an opportunity to reduce their tax bills and increase their profitability, all of which combines to have an adverse impact on UK plc. Businesses are literally wasting tens of thousands of pounds every year by not using the environmental tax allowances."

There also appears to be a lack of clarity on the channels through which businesses would expect to be informed of this type of tax break. Of those businesses who were not aware of ECAs, the majority (85%) believed that the responsibility lay with the Government to promote the schemes and provide support to businesses. Some (42%) also stated that accountants and professional advisers should be taking a larger role in increasing awareness, and around one third would also look to financial publications or seminars as a potential source of information.

The study also revealed that businesses are failing to consider 'green issues' when formulating longer-term strategy. For example, fewer than half had completed any kind of cost analysis to assess the impact of adopting more environmentally-friendly policies. Even then, many said this had only been done on an "informal basis" or "to some degree." In general terms the reasons given by those who had not conducted any cost analysis were to do with time constraints.

Also, whilst nearly three quarters of respondents (72%) had taken some practical steps towards becoming more 'environmentally friendly' by increasing recycling, turning off electrical appliances and reducing travel, very few had adopted any 'green policies' at a higher strategic level.

Dr Richard O'Doherty, Head of Economics at Bristol Business School, commented in conclusion that: "The research has confirmed that whilst there is a high awareness of environmental issues this is not necessarily being addressed at a strategic level within businesses. This lack of environmental strategy, together with the low awareness and take-up of ECAs, indicates that small to mid-tier businesses have a lot to do to show that the environment is firmly on their board agendas."