Enhanced Capital Allowances

Enhanced Capital Allowances (ECAs) enable a business to claim 100% first-year capital allowances on their spending on qualifying energy efficient plant and machinery.

Businesses can claim a reduction on their taxable profit by the full cost of spending in the year the investment was made.

This can deliver a helpful cash flow boost and a shortened payback period in addition to cost savings from reduced energy bills.

To qualify, equipment purchased must appear on the Energy Technology List - a list complied by the Government of energy efficient products.

Example equipment - Boilers, Combined Heat & Power, HVAC zone controls, Warm air radiant heaters.

How ECAs Work

1 - Choose a product from the Energy Technology List
      The equipment applies to a wide range of technologies and equipment from boilers to       refrigeration.  New products are added on a monthly basis.

2 - Make a capital purchase*
       Purchase the equipment and keep the invoice.

3 - Claim the Enhanced Capital Allowance.
        Include the cost of the equipment in the box on the tax return for first-year allowances.  Check         the tick box to indicate that you are claiming ECAs.  There is no requirement to provide any         supporting documentation within the return.

*Only applicable to companies paying corporation tax.

ECA Example

Here is an example to illustrate the cash flow benefit of an ECA.

A business paying tax at 30% spends £10,000 on an ETL listed product.  It claims £10,000 ECA against its taxable profits of the period of investment.  This reduces the business' tax bill by £3,000.

This compares to the general annual allowance of £2,500 available for spending on equipment which would have reduced the business' tax bill by only £750.

And! This doesn't include the cost savings the business would make on the reduced energy consumption of the new equipment.

Quote - A 20% cut in energy costs represents the same bottom line benefit as a 5% increase in sales.

Source: Carbon Trust