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Enhanced Capital Allowance Scheme

The Government introduced the Enhanced Capital Allowance (ECA) scheme in 2001 to encourage businesses to invest in low carbon, energy-saving equipment. It is designed to help the UK reach its Kyoto target of reducing carbon emissions by 20%. The main cause of climate change is carbon emissions produced by burning fossil fuels. Around half of these come from businesses and industrial processes, so efforts to reduce emissions focus on these areas.

What does the ECA Energy scheme involve?

The scheme provides a tax incentive to businesses nationwide, that invest in 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

Key Features of the ECA scheme

  • Open to all businesses that pay UK corporation or income tax, regardless of size, sector or location.
  • 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 published energy-saving criteria.
  • Only spending on new and unused energy-saving equipment can qualify for Enhanced Capital Allowances.
  • 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.

Enhance Capital Allowance Scheme - Benefits

The ECA scheme can bring significant benefits in terms of immediate cash-flow and also a company’s energy efficiency and carbon footprint.

An immediate cash-flow boost
An ECA provides 100% tax relief on any investment in energy-saving equipment, in the same tax year as the purchase is made. This means a business in London or Nottingham, paying corporation tax at 28% will receive 28p tax relief for every £1 invested in energy-saving products.

Lower long-term energy costs
As well as the added tax incentive, investing in energy-saving equipment could reduce a company’s energy bills, as it has lower running costs. This will also reduce a company’s Climate Change Levy so there are significant long-term savings to be made from the initial investment. (see the graph below).

CA vs ECA life cycle cost calculations

Information source -

ECA Ref - Air Conditioning Equipment

If you would like to discuss how you could benefit from the ECA Scheme regarding your Air Conditioning System requirements, please Contact Us.