Accountants Sound Warning Over UK Eco-Friendly Tax Relief Scheme

by Robert Lee, Tax-News.com, London

18 January 2005

UK accountants are warning firms taking advantage of a tax relief scheme intended to promote energy efficiency that they may face an unexpected tax bill if the government amends a list of approved equipment, the Daily Telegraph has reported.

The enhanced capital allowance scheme was set up by the government to give companies an incentive to invest in environmentally friendly capital purchases, by allowing firms to offset 100% of the cost of new energy saving and water conservation equipment.

However, accounting firm Grant Thornton has pointed to a flaw in the legislation that could allow the Inland Revenue to claw back up to six years' worth of tax relief if capital equipment items are later removed from the government’s approved list.

"It seems unfair that investment decisions taken today with the capital allowances in mind can land businesses with an unexpected tax bill tomorrow," Clare Hartnell, tax partner at the firm, told the Telegraph.

The Revenue disputed the claim, countering that it is “absolutely untrue” that firms will be charged tax for previous years if a piece of equipment is removed from the scheme.

"If a company buys an item from the approved list of energy saving equipment entitling it to capital allowances then it will retain the ability to claim these allowances, even if the equipment is removed from the list at some time in the future," the Revenue argued, according to the report.

Recommended