Tax Breaks

The Government introduced the The Enhanced Capital Allowance (ECA) scheme in 2001 to encourage businesses to invest in low carbon technology. The scheme provides enhanced tax relief for spending on equipment which has environmental benefits, and operates in three key areas: energy-saving equipment, water-efficient equipment and low carbon dioxide emission cars.

The scheme, managed by the Carbon Trust on behalf of the Government, only applies to equipment that meets published energy-saving criteria. The Energy Technology List (ETL) details the criteria for each type of technology, and lists those products in each category that meet them.

It consists of two parts: 1) The Energy Technology Criteria List (ETCL), which sets out the qualifying energy-saving criteria for each class of technology, and 2) The Energy Technology Product List (ETPL), which lists the products and technologies that are eligible for an ECA.

 Key Features
•    The sheme is open to all businesses that pay UK corporation or income tax, regardless of size, sector or location.
•    It provides 100% first-year capital allowances on investments in energy-saving equipment against taxable profits of the period of investment.
•    All the products listed on the ETPL must meet the energy-saving criteria, published in the ETCL.
•    Only spending on new and unused energy-saving equipment can qualify for ECAs.
•    Capital allowances are available for spending “on the provision of” plant and machinery. This can include certain costs arising as a direct result of the installation of qualifying plant and machinery such as; transport of the equipment to the site, and some direct installation costs.

Which technologies and products qualify for ECAs?
Energy Technology Product List (ETPL) gives up-to-date details of the products and technologies that qualify. Currently on the list are:

     Air-to-air energy recovery
     Automatic monitoring and targeting (AMT)
     Boiler equipment
     Combined heat and power (CHP)
     Compact heat exchangers
     Compressed air equipment
     Heat pumps for space heating
     Heating ventilation and air conditioning zone controls
     Lighting
     Motors and drives
     Pipework insulation
     Radiant and Warm Air Heaters
     Refrigeration equipment
     Solar thermal systems
     Uninterruptible Power Supplies (UPS)
     
Businesses are able to claim 100% first-year capital allowance on investments in energy-saving equipment, against the taxable profits of the period of investment. ECAs bring forward the time that capital allowances are available for spending on plant and machinery.

Please refer to www.eca.gov.uk for more information.