New Green Alliance report identifies barriers to circular economy development and three priority recommendations for further support from the Treasury.
The report, How the Treasury can mainstream circular business, also interviews ten circular businesses to understand their business cases, the barriers to broader adoption of what they do and the incentives others would need to adapt their models.
The policy recommendations Green Alliance highlights in the report are for the Treasury to fix aspects of the tax system that disadvantage circular practices and improve its understanding of tax impacts to create better policies to meet environmental goals.
The report also says the treasury should provide financial assistance through a dedicated fund to support circular businesses facing high upfront costs, as well as businesses creating the circular logistics and reverse supply chains necessary to support national markets.
Green Alliance states that the Treasury should “level the playing field” between circular and linear business models by changing the tax system, as it says certain parts “actively discourage” greater circularity.
The report calls for the Treasury to charge zero VAT on spare parts and labour. Refurbishing buildings should also be zero-rated, the report states, which is the same as new build properties. The report also says that tax relief for new businesses, such as the Seed Enterprise Investment Scheme (SEIS), should be more accessible to leasing businesses.
Green Alliance is also critical of the government as it says it doesn’t gather evidence on how tax measures impact behaviour.
Overall, the report claims that the circularity is being taken up by small businesses but there is a scope for larger existing businesses to incorporate more circular approaches. However, both circular businesses and businesses looking to change their linear model are held back by “embedded behaviours” and “structural challenges”, the report says, which the government can address.
