Tax scheme rewards green investments

Government green tax breaks scheme criticised for not being publicised

The government has come under fire for its failure to adequately publicise the Enhanced Capital Allowance (ECA) scheme and extend sizable environmental tax breaks that could have a major impact on firms' datacentre infrastructure investments.

The ECA is run by non-government body the Carbon Trust and allows firms to deduct investments made in certain energy efficient equipment against corporation tax or income tax, helping them to slash equipment costs and improve cash flow. Products eligible for the scheme include technologies typically used in datacentres, such as air conditioning, compact heat exchangers and automatic monitoring equipment.

But Nick Ewing, solutions consultant at datacentre services firm Comtec Power, said many firms were unaware that their investments could be eligible for the tax break. "Most customers we speak to don’t know about this," he said. " We've spoken to customers who were gobsmacked they could get money back on their investment."

Nigel Montgomery of analyst firm AMR Research said many firms were likely to be missing out on potential tax breaks as they tended to manage datacentre infrastructure at a local level through datacentre and facilities managers. " Because a lot of datacentres are being managed in isolation the local managers are not always au fait with all the possibilities open to them [such as the ECA scheme]," he said.

He also suggested that perhaps government had not done enough to publicise the scheme. "A cynic might ask, 'Well why would you [publicise it]?' Is it in their interest to advertise something that means less revenue?"

Separately, the Department for Environment-backed Market Transformation Programme (MTP) will this month publish a policy discussion document aimed at fostering industry discussion on promoting the adoption of power-thrifty datacentres.

“We’ve tried to come up with initiatives that help increase the penetration of energy-efficient servers,” said Robin Murray, a consultant on the programme.

Robert Tozer, technology director of EYP Mission Critical Facilities, has been advising the MTP and said the aim is to have “something tangible and practical” that will be more effective than the current ECA scheme where “uptake hasn’t been that great”.

Murray and Tozer said that component-level ratings were impractical but a scheme that would let independent consultants assess new-build datacentres and reward energy efficient efforts was more promising.

Meanwhile, the scale of new green taxes that businesses will face are expected to become clearer with the Chancellor Gordon Brown set to announce plans for an extension of the current international carbon trading scheme and an increase in taxes on gas guzzling cars and air travel as part of this week's pre-Budget report.

Brown's announcement follows the unveiling of new carbon tax plans from the Conservatives. Under proposals released as part of a consultation document by shadow chancellor George Osborne the Tories would replace the current Climate Change Levy with a Carbon Levy and increase taxes on each tonne of carbon emitted.

However, Osborne insisted any increase in green taxes would be offset by a reduction in other corporate taxes so that the overall burden on businesses would not rise. "We want to shift the tax burden away from income and investment and onto pollution," he said. "Pay as you burn, not pay as you earn."

Both Brown and Osborne's proposals are likely to increase the financial savings firms can realise from reducing their carbon footprint and, as a result, they are likely to further crank up pressure on IT chiefs to improve their department's energy efficiency and invest in online communication systems capable of cutting corporate travel.