Tax incentives will help cold chain transport businesses invest in cleaner refrigeration systems

Tax incentives will help cold chain transport businesses invest in cleaner refrigeration systems

The UK Government’s 2021 Spring Budget contained a number of important measures which everyone in the cold chain transport sector should be aware of and consider acting upon.

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The UK Government’s 2021 Spring Budget contained a number of important measures which everyone in the cold chain transport sector should be aware of and consider acting upon.

The details are relevant to many roles and decision-makers including finance directors, managing directors and fleet managers in transport refrigeration and food business which use refrigeration and temperature control equipment.

They offer significant new capital allowances for investment in plant and machinery assets. Both will allow investing companies to lower their corporation tax bills.

Chancellor Rishi Sunak announced a two-year tax incentive programme to help cold chain transport operators invest in new refrigeration systems. Companies will be able to claim 130% capital allowances on certain types of new machinery, including refrigeration units, from April 2021 until March 2023.

In addition, the budget had a 50% first-year allowance (FYA) for special rate assets (including long life assets) for companies until March 2023,

The Chancellor also confirmed that fuel duty subsidies on red diesel, which is traditionally used to power truck refrigeration units, will end in 12 months – April 2022. If you operate a diesel-powered fridge, the cost of operating it will increase by 46.81 pence per litre.

These developments illustrate the increasing need to adopt more efficient and cleaner technology. Making the transition to cleaner systems will bring a range of benefits for businesses, including generous tax incentives and reduced fuel costs, along with wider environmental benefits for us all.


Super-deductions for specific equipment

‘Super-deductions’ for corporation tax are being offered as part of various measures to stimulate business investment.  Companies can claim 130% capital allowances on qualifying new machinery, which includes refrigeration equipment, from April 2021 until March 2023. Under the super-deduction, for every pound that a company invests its taxes will be cut by up to 25p.

Types of qualifying equipment include:

  • Refrigeration units
  • Tractors, lorries and vans
  • Electric vehicle charging points
  • Solar panels
  • Compressors
  • Ladders, drills and cranes
  • Foundry equipment
  • Office furniture

This tax change makes the UK’s capital allowance arrangements more internationally competitive, says the Government. It lifts the net present value of plant and machinery allowances from the position of 30th in the OECD to 1st, it says.


Other 2021 Budget highlights

Three other measures were also highlighted in the Budget. These are:

  • The 50% first-year allowance (FYI) for special rate assets (including long life assets) for companies until March 2023.
  • The Annual Investment Allowance (AIA) which provides 100% relief for plant and machinery investments is up to its highest-ever threshold of £1 million until the end of December this year.
  • Companies based in the new Freeport tax sites can access new Enhanced Capital Allowances (ECA+) and companies, individuals and partnerships can benefits from increased level of Structures & Buildings Allowance (SBA+) for investments until September 2026.

Overall, the Government wants to change historically weak investment over the past decade and help firms move develop for the future after the covid-19 pandemic.


Red diesel fuel duty changes

Another important change for cold chain businesses was confirmed in the 2021 Budget. This is to end fuel duty rebates on red diesel in April 2022 – less than 12 months away.

Red diesel is traditionally used to power truck refrigeration units. Transport businesses which use diesel-powered refrigeration systems for trucks and trailers will be affected by the Government cuts to fuel duty rebates.

Traditional heavy truck refrigeration systems rely on an additional industrial diesel engine to power their cooling operations. These systems need their own fuel supply and do not conform to the latest emission standards for modern truck engines.

The Government plans to reduce red diesel duty rebates across a number of industries , as part of wider moves to tackle climate change, improve air quality and encourage cleaner transport. Other changes will include local authorities launching Clean Air Zones this year and next.

Back in 2018, the Government launched a call for evidence from UK businesses about the red diesel plans. Then in its Spring 2020 Budget, the Government announced it would remove the entitlement across a number of sectors and applications. It then launched a public consultation in mid-2020 and conformed its plans in the 2021 Budget.

Currently, the fuel duty rate for diesel used in diesel engine road vehicles (DERV) is 57.95 pence per litre. However, diesel intended for other uses is entitled to a rebate of 46.81 pence per litre (an 81 per cent discount). This gives an effective duty rate of 11.14 pence per litre. This rebate will end for many users in 2022.


Get expert advice on temperature control options and innovations

It’s vital that everyone in the cold chain industry is aware of this and has full access to objective information about all cleaner technology options.

Many people, especially those in non-fleet or technical roles, may not be aware of other technologies and how they can transition their fleets in a phased, hassle-free way.

Some may think greener technology is still in its infancy. However cleaner systems, such as FRIGOBLOCK, have been established for 40 years. They are the systems of choice for some very large operators who understand the considerable benefits they offer.

Operators who change will see reduced diesel consumption and costs, greater efficiency, lower CO2 and noxious emissions, lower maintenance costs and rapid temperature pulldown power. These electrical systems offer good return on investment and will help future-proof your businesses.

Electrification of machinery and technology is gathering pace, as businesses, economies and nations seek to move away from burning fossil fuels.

At MWL, we’ve been closely following the Government plans over recent years and preparing for change.  We promote advanced new technology while also working with existing equipment. We’ve worked with FRIGOBLOCK refrigeration systems for 30 years and are a sales and service dealer.

One of our key missions is to raise awareness of the best technology and innovation across the sectors we serve – refrigerated transport, cold rooms, HVAC for commercial and industrial buildings, and temperature control solutions for manufacturing processes.

Adapting to electrification and other, more-efficient temperature control systems is easier than many businesses and consumers realise. It can be done in managed phases over time rather than one instant switch, minimising any potential disruption. But for numerous reasons, awareness of facts and the benefits of electrification and other cleaner systems are patchy in business communities and wider society.

Helping clients to make the phased transition to electrification and other forms of cleaner, energy-efficient temperature control is one of our specialisms and forms part of our values and ethos. We’re proud to be helping clients adapt to new technology now to future-proof their businesses.

We offer trusted, objective engineering support to businesses across the UK. We supply, install, maintenance and service of all types and brands of temperature control systems.

Get in touch to see how we can help your business adapt and flourish into the future.

Email us at

Michael Ward Limited Transport Refrigeration Unit

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