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KPMG urges businesses to get set for carbon levy

29 Mar 2011

UK organisations have been urged to prepare for the introduction of the carbon levy next month, impacting on 3,000 business participating in the Carbon Reduction Commitment (CRC) energy efficiency scheme.

Participating organisations should act to comply with the legislation and bear in mind that energy usage will determine their levy, accountancy firm KPMG has warned.

From this April onwards, participants in the scheme must pay for every tonne of carbon resulting from energy usage at sites they control.

The carbon levy will initially be set at £12 per tonne of carbon and is estimated to add up to nine per cent to annual energy costs.

The levy will be calculated based on energy usage monitored between next month and April next year and will need to be paid by April 2012.

KPMG said it believes that participating organisations should consider accounting for their carbon cost as an operating expense in their profit and loss account.

Vincent Neate, KPMG’s head of Climate Change & Sustainability, said, ‘At present there is no authoritative accounting guidance within the International Financial Reporting Standards or the UK Generally Accepted Accounting Practice explicitly for transactions involving carbon allowances, but now that this cost is a known entity it is sensible to account for it in line with an organisation’s existing accounting principles.

‘Although the Spending Review has delayed the scheme’s impact on cash flow, the accounting treatment of the cost should be addressed now. As the CRC now operates in a very similar way to the CCL, though paid at the end of the CRC year rather than with each energy bill, we recommend organisations consider treating the two in a similar way in the accounts.’

Businesses under the CRC will need to make evidence of their energy usage available within four months from now for the initial carbon reporting year that began last April.

Neate said, ‘We are being contacted by a large number of organisations seeking comfort that their evidence packs meet compliance requirements, therefore avoiding steep data misstating penalties of £40 per tonne. And, with our experience showing that more than half of organisations are indeed misstating their data, financial and reputational penalties are a very real risk.’

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