‘Lower corporation tax will help UK hit net zero by 2050’

Policy needs to ensure that businesses make the change and net zero is not allowed to be dismissed, the IoD warns

Big Zero Report 2023

Net zero must be put at the heart of business planning.

That’s according to the latest report by the Institute of Directors (IoD), which has laid out four policy recommendations it claims will help smaller businesses begin to implement net zero into their structure.

It claims that the government’s 2050 net zero target will not be achievable without small enterprises on side.

The IoD is calling for a lower corporation tax rate to be introduced for organisations that have achieved net zero – to incentivise other businesses to follow suit. The report does state that this should not necessarily be driven with more money from taxpayers but should act as a key partition between net zero and non-net zero businesses.

It is also urging government to push through changes on carbon accounting for companies – requiring more stringent recording and reporting of emissions that will determine the tax bracket they fall into.

If taxes are driven by green action, this will change the landscape of business operations in the UK, the paper claims.

More support for helping smaller companies get on the net zero journey should also be in place, to prevent it becoming such a daunting task and to provide progress points along the way.

The necessity for landlords to tell SMEs the carbon impact of the building they rent is also considered of high importance.

Chief Economist at the IoD, Kitty Ussher, explains: “Since the government introduced its net zero target, there has been no structured policy initiative designed to increase the number of smaller businesses taking their own action. Instead, support for SMEs to decarbonise has fundamentally relied on firms making an active decision to seek it out.”

This report is calling for such decisions to become obligatory and that policy needs to be in place to ensure this happens.

“By creating a future wedge between the corporation tax paid by those businesses that are net zero and those that are not, there would be a clear incentive for all businesses to achieve the desired change.

“If implemented, we believe that this simple yet significant policy change would be a huge stride towards meeting this country’s climate change target,” added Ms Ussher.

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