Environmental Taxes Act

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Brief 213168 I have been asked to provide the Luminous Lighting Company with a legal opinion on the likely tax implications of section 10(1) of the Environmental Taxes Act 2007, which came into force in the UK on 31st January 2008, on its current business activities: The impact of section 10(1) of the Environmental Taxes Act 2007 on the Company’s current business activities; namely, manufacturing and supplying standard light bulbs, lamp bases and lampshades on a wholesale basis to supermarkets, garden centres, DIY stores, department stores and office equipment suppliers: The first thing to note is that s10(1) of the 2007 Act will only apply to those products[1] which are likely to be used in domestic premises. While this cannot be gleaned from a literal interpretation of s10(1), it is clear, from the long title of the Act, that Parliament did not intend for this tax to apply to products sold for use in non-domestic premises[2]. Therefore, I would advise the Company to request a tax exemption for all those products sold to retailers who will sell them for use in commercial premises[3], and a tax reduction for those goods sold to retailers who are unable to determine whether or not the products are more or less likely to be sold for use in domestic premises[4].

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In regard to those products which are likely to be sold for use in domestic premises, the first question to be determined is whether or not the standard light bulbs, standard lamp bases and/or standard lampshades manufactured by the Company can be classed as ‘qualifying products’ for the purposes of s10(1) of the 2007 Act. For the purposes of s10(1) a ‘qualifying product’ means: “Any item (or component of an item) which is not environmentally friendly and where the following conditions are satisfied: (1) An alternative item (or component) to the one in question is available at the time of sale or such an alternative item (or component) could be manufactured at no significant additional cost to the manufacturer; and (2) The said alternative item would be regarded as environmentally friendly under this Act.” Let us assess each type of product that the Company manufactures, in turn, to determine whether or not they are likely to be classed as ‘qualifying products’ under the 2007 Act: The Standard Light Bulbs: Assuming that these light bulbs would not be classed under the Act as being ‘environmentally friendly’, it appears that the sale of these products would attract an additional 3% tax, in accordance with s10(1) of the 2007 Act, because (i) there is an alternative product on the market; and (ii) this alternative product is energy saving, and thus, ‘environmentally friendly’. Additionally, the Company has admitted that the cost of manufacturing these alternative light bulbs is not significantly greater than the cost of manufacturing its existing light bulbs,

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