New Details of Climate Change Levy

The Chancellor confirmed that the controversial climate change levy, an energy ‘tax’ on all business users, will come into force in April 2001. The effect of the tax has been refined to address the concerns raised by various industries. Revenue raised by the tax will be recycled to business through a 0.3% cut in employers’ National Insurance contributions. It is predicted that the tax will raise 1 billion pounds.

Energy generated from renewable sources and "good quality" combined heat and power systems will be exempt from the tax. Support for energy efficiency improvements will be provided from a fund of 150 million pounds, under the scheme known as "Enhanced Capital Allowances".

Energy Intensive industries will receive an 80% rebate if they meet energy efficiency targets set by the government. The government is still in negotiation with these industries on setting these targets."

The climate change levy will have a major impact on the energy management policies of many large organisations. Andrew Goodwin, energy specialist at WS Atkins, provides an in-depth look at the implications of the levy in the April issue of Facilities Management Legal Update.

No Change on Stamp Duty for Commercial Property

The budget brought no move to introduce different rates of stamp duty for residential and commercial property, despite many predictions that a split was imminent. Consequently, businesses will suffer from the government’s attempt to dampen down the residential housing boom, by being caught up in the across-the-board increase in stamp duty which sees rates rising to:

• 3 per cent (2.5 per cent last year) for properties valued at between £250,000 -£499,000; and
• 4 per cent (3.5 per cent) for properties valued over £500,000 - in effect, nearly all business premises.

Residential and commercial property in the south east will be hardest hit, and the increased rate is likely to make the commercial property sector even less attractive to investors.

The Chancellor also announced proposals to reduce stamp duty on development of brownfield sites.

Taxable Benefit for Company

Cars As announced in last year's Budget, from 6 April 2002, company cars will no longer be taxed by reference to business mileage. Instead the taxable benefit will be calculated according to the level of the car's carbon dioxide emissions. The car's list price will still be used as the basis for the calculation, and the benefit will start at 15% of that list price going up to a maximum of 35%, depending on the emission levels.

The additional discount for cars over four years old will also cease to exist.

Where free fuel is provided to company car drivers, the scale charges have been significantly increased for 2000/2001, as follows:

Encouragement for Workplace Nurseries

All childcare provisions in the workplace are to remain free of National Insurance Contributions to encourage employers to provide more childcare facilities. . The provision includes employers who contract for places in commercial nurseries, as well as for childminder services and on-site nurseries or childcare vouchers.

Organisations which provide cash to meet or reimburse childcare expenses will need to make National Insurance Contributions. The employer will, though, be able to deduct the cost for tax purposes.

Construction Industry Scheme (CIS)

Two measures were announced to improve administration of the CIS (see previous bulletins), relating to vouchers and the issue of CIS 5 certificates for large companies.

Two consultative forums will also be established to consider how the administration of the CIS can be improved. We will report on the outcome of the consultation when details are available.

New Employee Share Plan

The existing rules for SAYE Sharesave and Company Share Option Plan are to remain.

There has been a consultation process in relation to the proposals announced for the new all-employee share plan which comes into effect from 6 April 2000. Following this, improvements to the proposals have been announced, for example companies will get corporation tax relief for costs incurred in providing shares in excess of the contributions made by employees.