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bigduckontax, Accountant
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Hi. I have a Corporate Tax question in relation to Ltd companies

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Hi. I have a Corporate Tax question in relation to Ltd companies and what purchases that can be set against tax or gain some other benefit. Need expertise in this area.

We have a company that sells Carbon Offsetting to UK companies - in the form of assessing companies use of energy (electricity, gas, fuel, etc) and the CO2 produced in the production & use of this energy.
Once we have this figure we calculate the number of trees that need to be planted to compensate for this usage over for one year.
Can these Customers offset the payments, they make to us, against tax in some way to effectively reduce the over cost and/or gain taxable benefit which can then also be reflected in their auditors annual reports - over and above just stating that they are a 'Carbon Neutral' operation. If there is a benefit - what is the correct term for this benefit and how do companies represent it in their tax?

Many thanks

Hello Ian, I'm Keith and happy to help you with your question.

I can see no reason why your customers cannot offset your bills for advice against their Profit and Loss Accounts as a business expense for professional services in the normal way. It is just an expense like any other.

I do hope I have simplified the position.
Customer: replied 3 years ago.

Hi Keith,

What exactly does that mean?

I we charge them £1000 to offset their CO2 - how much can they claim against tax - all of it (effectively making the payment for the trees free - i.e. they would have paid the money to the tax man and now they pay it to us - so no material difference) or if not all - what percentage of the 1000 can bet set against a business expense for professional services.


The whole 1K; if as a result their company records a loss for the year then this can be carried forward to future years and in some cases carried back against prior year's profits.
Customer: replied 3 years ago.

Thanks Keith,

Just what we needed to hear.



Customer: replied 3 years ago.

Actually Keith. Just need to further clarify something. We are not just giving advice & consultancy - we are purchasing the trees and planting them on their behalf. We provide a certificate to record the trees, location, number and amount of CO2 offset and the fact that they are Carbon Neutral for that year.

We own the land and we commit to managing those trees for at least 20yrs which will be when that amount of CO2 is offset.

Does this change anything?

The tress are never become the Customers property so not recorded as an asset.





No, there is no change as far as the customer is concerned. You have billed him 1K for services and he just passes it through his accounts as a business expense as normal.
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Customer: replied 3 years ago.

Sorry Keith - not sure if I can answer another related question. Something I was thinking about over night.

If take the cost of planting the trees for the Customer is £1,000

If we take the profit the customer has is £1,000.

To pay us £1,000 remove the profit so they pay no tax on it.

However, if they didn't put h money to our trees they would be taxed on the £1,000 at 40% corp tax.

End result would be that the tax man gets £400 - they get £600.

So the end result of setting this off against tax is that they only really get £400 benefit per £1,000?

Is this correct?




This is an entirely separate question and should really be posed as a new one on the site.

Customer: replied 3 years ago.

Hi Keith.

That's disappointing as I see it as very much part of the same question - that if we'd been having a chat about it (rather than slightly stilted emails) would have all come up, as the conversation developed, in less than 5 mins.

I'm afraid I'm not going to raise this as another question.




In my view you have gone far beyond the scope of the original question which was essentially was an invoice allowable against income.
Customer: replied 3 years ago.



Just poorly worded question - which is a weakness of the system.




I have opted out of this question.

I am responding to a poor rating.

The original question was essentially was an invoice allowable against income and this was answered correctly.

Subsequently the questioner went into increasing detail regarding this invoice far beyond the scope of the original question which I felt inappropriate in the circumstances.

I consider my response reflects a right and proper professional approach.