Enhanced Capital Allowance (ECA) aims to encourage businesses to invest in energy saving technologies and machinery (which includes air conditioning, HVAC & refrigeration), in order to help reduce the effects on climate change.
The scheme lets businesses claim 100 percent first-year allowances, i.e., tax relief, on investments in certain technologies and products.
Advantages of the Enhanced Capital Allowance (ECA) Scheme
ECA scheme lets the business claim 100% first-year tax relief on investments in qualifying technologies
The Enhanced Capital Allowance (ECA) scheme lets the business claim 100% first-year tax relief on investments in qualifying technologies and products, such as the installation of new, designated energy saving air conditioning and HVAC equipment.
This means businesses can deduct the whole cost, or up to the published claim value, of buying the energy-saving product against the taxable profits in the year of purchase.
Reducing investment costs and environmental impact
Claiming ECA tax relief can help the business to reduce investment costs and its environmental impact. This improves cash flow in the year that the business invests in the new equipment and reduces the time it takes to pay back for the investment.
Using the equipment itself will also help reduce the impact that the business has on the environment and could help reduce energy bills as well.
Products Eligible for Enhanced Capital Allowance (ECA)
Businesses can only make claims for tax allowances under the Enhanced Capital Allowance (ECA) energy scheme for certain technologies. Qualifying products within these technologies must meet certain eligibility criteria specified on the Energy Technology List (ETL).
Only new plant and machinery are eligible for an ECA; used or second-hand plant do not qualify
Only new plant and machinery are eligible for an ECA; used or second-hand plant and machinery do not qualify.
ECAs are not available on the cost of plant and machinery for use within a property used as a dwelling that the business leases out in the United Kingdom (UK) or overseas. However, items bought for use within common parts may qualify.
Products covered in the Enhanced Capital Allowance (ECA) scheme Include:
- Air-to-air energy recovery
- Boiler equipment, including hot water and steam boilers, biomass boilers and room heaters, condensing water heaters and flue gas economizers
- Combined heat and power (CHP)
- Compressed air equipment, including flow controllers and master controllers
- Heat pumps, including air source, water source and ground source
- Heating, ventilation, and air conditioning (HVAC) equipment, including HVAC zone controls and close control air conditioning
- Pipework insulation
- Refrigeration equipment, including air-cooled condensing units, cellar cooling equipment, automatic air purges, and refrigerated display cabinets and fittings
- Warm air and radiant heaters, including overhead radiant heaters, packaged warm air heaters and biomass fire warm air heaters
For any advice on the Enhanced Capital Allowance (ECA) scheme, please speak to a professional accountant or financial advisor.