Enhance Capital Allowance
The Enhanced Capital Allowance (ECA) scheme is a key part of the Government’s programme to manage climate change, and is designed to encourage businesses to invest in energy-saving equipment. The scheme provides a tax incentive to businesses who invest in equipment that meets published energy-saving criteria.
Why was it introduced?
The Government introduced the ECA scheme in 2001 to encourage businesses to invest in low carbon, energy-saving equipment. As part of the Climate Change Levy Programme, it’s designed to help the UK reach its Kyoto target of reducing carbon emissions by 20%.
Climate change is becoming one of the biggest threats to our planet’s environment, and the biggest cause of this is carbon emissions produced by burning fossil fuels. Around half of these come from businesses and industrial processes, so it’s important that efforts to reduce emissions focus on these areas.
There are three ECA schemes which provide enhanced tax relief for spending on equipment which has environmental benefits: energy-saving equipment, water-efficient equipment and low carbon dioxide emission cars. For a full list of equipment visit www.eca.gov.uk
The scheme enables businesses to claim up to 100% first-year capital allowance on investments in energy-saving equipment, against the taxable profits of the period of investment.
Key Features of the ECA scheme
- Open to all businesses that pay UK corporation or income tax, regardless of size, sector or location.
Provides up to 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 energy-saving criteria, published in the ETCL.
- Only spending on new and unused energy-saving equipment can qualify for ECAs.
- 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.