New taxes will hurt small firms that try to go green

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Small businesses that want to do their bit for the environment face higher tax bills.

The Conservatives have warned that SMEs that want to tackle climate change and install green energy technology will face a hike in their tax charges.

The Valuation Office Agency (VOA), an arm of Inland Revenue, is preparing to tax solar panels, wind turbines and micro-generation technology with higher business rates and council tax. This follows news that Gordon Brown is set to abandon Tony Blair's targets on renewable energy.

The small print of last month's pre-Budget report revealed that "the installation of micro-generation equipment in business premises can trigger an increased liability for business rates".

Parliamentary Questions have also revealed that green energy measures will result in higher council tax bills. Such measures can push a home into a higher council-tax band when the house is sold or after council tax revaluation. The VOA is already undertaking training and preparations for the revaluation. The inspectors are also responsible for inheritance tax valuations.

Previously unpublished research by the Renewable Energy Association calculates that the higher business rate liability "more than wipes out the value of the electricity generated". As a result, a solar panel "would be a continual financial drain on the company". A wind turbine will increase business rates by £1,350 a year, while a solar (photovoltaic) installation will mean an extra £2,700.

Eric Pickles MP, Tory spokesman for local government, said: "Rather than using the tax system to reward green behaviour, Gordon Brown is crippling small businesses... hitting them with unfair stealth taxes."