As part of the 2018 Budget, the Chancellor has announced the closure of the enhanced capital allowances (ECA) scheme from April 2020. Businesses looking to invest in energy efficiency measures should plan now to take full advantage of tax relief opportunities, says Remeha.
The Government’s measure to close the enhanced capital allowances scheme will end the first year allowance on theEnergy Technology List (ETL) and the Water Technology List (WTL), including the associated first year tax credit, from April 2020 onwards.
It will also update the lists of energy-efficient or environmentally beneficial products or technologies for 2019 to 2020 which are eligible for first-year allowances.
Paul Arnold, product manager at Remeha, says: “The ECA is a popular scheme that has been in place since 2001 to encourage the manufacture and uptake of increasingly energy-efficient products and technologies.
“Energy efficiency is one of the most cost-effective ways for businesses to improve the energy performance of their buildings. As a large user of energy in a building, heating is frequently a starting place for efficiency measures. And by providing accelerated tax relief on higher energy-efficient equipment, like our own condensing boiler range, the ECA has helped businesses take a whole-life approach to costing for greater long-term energy and emissions savings.
“Businesses will still have an annual investment allowance (AIA) of £200,000. But we would advise any businesses intending to invest in energy efficiency upgrades to plan and budget in the next year. This will allow them to take advantage of tax relief for ETL products via the ECA if the AIA maximum has already been met.”
The ECA scheme was introduced in 2001 to provide a cash-flow boost to incentivise the use of more energy-efficient equipment and, in so doing, support the nation’s move to a low-carbon economy. First year allowance schemes currently allow 100% of the costs of the investment in qualifying equipment to be written off against the taxable income of the period in which the investment is made. There is no cap on the amount that can be claimed for profit-making businesses.
Qualifying costs include the installation and transportation costs in addition to the cost of the equipment.
For more information on the ending of ECA allowances visit: https://www.gov.uk/government/publications/ending-enhanced-capital-allowances-for-energy-and-water-efficient-plant-and-machinery