Introduce a lower corporate tax rate for net zero companies

The government has set a national climate change target of net zero by 2050. However, there is a lack of effective incentives and support for small and medium enterprises to achieve net zero themselves.

Therefore, the IoD calls on the UK government to:

  1. Be explicit that he wants every business to achieve net zero in their operations.
  1. Introduce, with several years’ notice, a lower corporate tax rate for organizations that have achieved net zero, compared to those that have not. This recommendation does not necessarily require greater use of taxpayer resources or, conversely, that taxes necessarily increase for other businesses. What is important is that there is a gap between the two to act as a clear financial incentive to achieve the desired change.
  1. Develop a carbon footprint accounting methodology, in line with the existing approach for corporate profit reporting. Public limited companies would be required to keep records and report their carbon footprint and use this information to determine which corporate tax bracket they qualify for.
  1. Undertake an assessment of the adequacy of available support for businesses to become net zero. Additional measures should be considered, such as the development of a recognized kitemarking system for companies to report their progress towards zero emissions, strong career paths for zero carbon advisers and measures to close the reporting, such as a requirement for affected business owners. inform SME tenants of the carbon impact of the use of their building.

Kitty Ussher, chief economist at the Institute of Directors and author of the report, said:

“Since the government introduced its net zero target, there has not been a structured policy initiative designed to increase the number of small businesses taking their own action. Instead, SME support for decarbonization has largely relied on companies actively deciding to seek it out.

“This does not mean that SMEs do not want to play their part. Our own research shows that business leaders are keen to understand what they need to do, but there is uncertainty about the short-term business case for change, especially given other pressing calls about the time and resources available to their organization in the here and now. .

“Impact and sectoral initiatives can go no further. By creating a future gap between corporate tax paid by companies that are net zero and those that are not, there would be a clear incentive for all companies to achieve the desired change. If implemented, we believe this simple but meaningful policy change would be a huge step towards achieving this country’s climate change goal.

The IoD guidance document, ‘The Green Incentive: How to Put Net Zero at the Heart of Business Planning‘, downloadable here.

Luisa D. Fuller