Enhanced Capital Allowance (Investment Tax Relief)

The Enhanced Capital Allowance scheme (ECA) has been designed to encourage businesses to invest in energy saving equipment and hence reduce C02 emissions. The scheme provides a tax incentive to businesses that invest in equipment that meets published energy-saving criteria. The Energy Technology List (ETL) details the criteria for each type of technology and lists those products in each category that meet them. It is managed by the Carbon Trust, on behalf of the UK Government. All businesses that pay UK corporation or income tax may claim 100% first-year capital allowances on investments in energy-saving equipment against taxable profits for the period of investment.

How it Works

If your business pays corporation tax at 30%, every £1,000 spent on qualifying equipment would reduce its tax bill in the year of purchase by £300. In contrast, for every £1,000 spent the generally available capital allowance for spending on plant and machinery* would reduce your businesses tax bill in the year of purchase by £75. In other words, an ECA can provide a cash flow boost of £225 for every £1,000 it spends in the year of purchase**.

For further information see www.carbontrust.co.uk.

Rapid Air Conditioning constantly monitor the products on the Energy Technology List to offer you the best opportunities for tax relief on your investment.

* 25% a year on the reducing balance basis.
** ECAs provide 100% tax relief, so there is no further tax relief in later years. The general rate of capital allowances does not provide 100% tax relief so there is a balance of spending to carry forward on the reducing balance basis for relief in later years.