» Enhanced Capital Allowances
With Enhanced Capital Allowances (ECA’s), businesses can claim a reduction on their taxable profit by the full cost of spending in the year the investment into qualifying equipment 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 includes energy efficient boilers, combined heat & power (CHP), and radiant heaters.
More information is available at www.eca.gov.uk/etl
» 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.
