A Brief Guide to Enhanced Capital Allowances

Enhanced Capital Allowances Defined

The Enhanced Capital Allowance Scheme enables businesses to claim 100% on the first year capital allowance on investments. This is weighed against specific energy saving equipment and the taxable profits of the period of investment.

Capital allowance enables businesses to write off the capital cost of purchasing new plant machinery, such as boilers and motors, against their taxable profits.

Eligibility and Claim Values

In order for a product to be eligible for ECA’s it must be reviewed every year and updated to reflect any technological and market developments. New categories may be added to the scheme every year. These, however, must be approved by the Department of Energy and Climate Change (DECC), Her Majesty’s Revenue and Customs (HMRC) and the Treasury.

In addition to determining the eligibility for an ECA, the criteria may be used for businesses and manufacturers to enhance specifications, and to aid product development.

How to Claim

An ECA is claimed through business income or corporation tax return, in the same way as any other capital allowance.

There are, however, a number of different types of supporting evidence needed. Such evidence depends on whether your product has been listed or non-listed in its technological area.

Non-Listed Technology Areas

Technological categories, supported by the ECA Scheme, such as CHP, component-based AMT, lighting and the insulation of pipe work do not have products listed on the Energy Technology Product List. Such products qualify for an ECA when the product meets relevant eligibility criteria.

Qualifying products are not listed on the Energy Technology Product List as it’s impractical to list all possible product variations. In such instances it’s recommended that you obtain confirmation from your supplier / installer that all of your products meet the ECA eligibility criteria.

Listed Technology Areas

The products in all other supported technology categories need to be listed on the Energy Technology Product list at the time of purchase to be considered eligible for an ECA. All claims should be based on the invoice value of the eligible product. Any claims will include additional direct costs such as the transportation and installation of equipment and any professional fees. This should be discussed with your tax advisor or HMRC in advance.

If the invoice value of the equipment cannot be identified, the tax relief should be based on the claim value. Any relevant claim values to use are included in alongside the relevant eligibility criteria.

If you’ve any further questions regarding Enhanced Capital Allowances, feel free to conduct your own research, or contact us.



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