Corporation tax could be 'tool to incentivise net zero', says IoD

03 Mar 2023

The Institute of Directors (IoD) has found that small firms who have no plans to become net zero would be more likely to do so if it resulted in a lower corporation tax bill.

A survey carried out by the IoD revealed that two thirds of small and medium-sized enterprises (SMEs) who presently have no plan to achieve net-zero stated they would be much more likely to accomplish it if it generated a lower corporation tax bill.

Just 28% of firms polled by the IoD currently have a plan in place to achieve net zero, the survey also found.

Kitty Ussher, Chief Economist at the IoD, commented: 'Corporation tax is the tool to shift the dial on net zero among SMEs. Because government policy has so far focused on the larger emitters, only a very small proportion of SMEs currently have a plan to hit net zero.

'They tell us that the main reason is the lack of a clear business case, which is a particular problem for individual firms where energy is only a small part of their total costs. Yet, taken together, smaller companies account for nearly half of total industrial emissions. We cannot meet our carbon goals without them.

'In order to incentivise the change, our proposal is that companies that can demonstrate net zero should pay a lower rate of corporation tax.'