The ECA (Enhanced Capital Allowance) scheme allows businesses to invest in energy-saving machinery or technology which may be too expensive for them to afford previously. The government introduced this incentive for organisations to purchase energy efficient equipment, and to, therefore, be rewarded via the UK tax system.
The aim of the scheme is to encourage businesses to choose equipment which will eventually help the government meet its CO2 reduction and climate targets.
Normally, the tax system only allows organisations to take into account the price of capital equipment bought over a few years. However, the ECA scheme grants businesses the ability to set 100 percent of costs in the first year of buying against taxable profits in the single tax year. This gives businesses a cash flow advantage.
For example, if you buy a display freezer for your catering business, you will gain all the benefits in the very first year of purchase. If your organisation is responsible for the electricity bills on this appliance, then selecting an energy efficient display freezer will guarantee savings on bills throughout its life.
In order to qualify for the approved list, appliances must be tested independently and marked with the ECA logo stamp of authority, which proves that your business is energy efficient and cares for the environment. Go to FFD for a range of display freezers.
What is the Criteria?
The end buyer of the appliance must be eligible. So if you run a business, are a bar or shop owner, and use the appliance within your store, then you can benefit from the scheme if you paid for it yourself.
If you bought the appliance to sell to someone else, then you are unable to utilise the tax break. However, if you are purchasing the appliance to lend out or give away you can claim from the ECA scheme.
Your appliance must also meet specific performance standards in order to be accepted for the ECA scheme. These are the common standards within the food industry, such as M1 and M2 which give performance and temperature ratings to equipment.
How to claim
To claim from the ECA scheme, all you have to do is insert the figure on your business corporation tax return, so visit the government website for a list of eligible products and how to claim.a