Upcoming plans from the government to simplify the energy tax and reporting framework have been met with support by the majority of respondents to a new survey, despite a considerable proportion being unaware of the consultation process which is already underway.
The response to the ‘Reforming the business energy efficiency tax landscape’ consultation released earlier this year outlined the government’s plans to abolish the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme while increasing the Climate Change Levy (CCL) to compensate for the loss in revenue.
As well as reducing the number of payments across the array of schemes currently applied to businesses, it will also streamline reporting obligations into a single framework to reduce administrative burdens.
According to a new survey by npower Business Solutions of 100 retailers, 90% agreed that the introduction of a single energy consumption tax would encourage them to keep their business within the UK, while almost as many (88%) believe it will help them stay competitive.
However, the survey also pointed to evidence that the government has not done enough to engage with business on the plans, with 39% of those businesses surveyed not aware that further consultation is due to take place in the coming weeks. In addition, a further 39% who were aware do not plan to take part despite the impact any future changes to the current regime are likely to have.
Npower Business Solutions estimate that the planned rises in CCL, the tax on energy delivered to non-domestic users, will increase rates on power from a current level of £5.59MWh in April 2016 to £8.47MWh by April 2019 – an increase of more than 50%. The percentage increase on gas is set to be even higher, rising by almost 74% to reach £3.39MWh in April 2019.
The business support arm of the utility says all non-domestic energy customers will be exposed to this increase unless they have a climate change agreement in place, which is usually reserved for high energy users or their consumption falls within the de minimis amount of energy at their premises.
The CRC will remain in place while the CCL rates rise, only being removed following the 2018/19 compliance year. This is likely to level increased costs on businesses during this transitional period, with npower Business Solutions warning that business whose energy consumption was below the 6GWh (electricity) consumption threshold that mandated participation in CRC.
The reasoning behind this policy change is intended to motivate companies to invest in energy efficiency between now and 2019 to help them avoid the main cost increases associated with the new regime.
David Reed, head of npower Business Solutions, said: “We wouldn’t want to see companies unduly penalised for not receiving the help they need to better manage their energy use. Transparent communication is vital here: clear energy reduction targets are important and we are supporting the requirement to make energy efficiency the starting point for regulatory reporting.
“But changes to the CCL’s rates will negatively impact business if firms aren’t fully aware that they need to prioritise energy efficiency.”
Despite the increased costs coming down the line for businesses without an energy reduction strategy, the survey found that the new strategy may gain traction. Two thirds (66%) of respondents agreed that a planned move to a single energy efficiency tax and a simpler new reporting scheme will incentivise investment in energy efficiency.