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ECA - Part 1: Overview of Enhanced Capital Allowances for Energy-Saving Investments Contents
A business can claim 100 per cent first-year allowances (FYAs) if it incurs qualifying expenditure on designated energy-saving plant and machinery. It must satisfy certain conditions. The key points are summarised below. Qualifying expenditure is capital expenditure incurred on new energy-saving plant or machinery for business purposes. The scheme originally included eight technology classes and was expanded in 2002, 2003 and 2004 to include further technologies. There are currently sixteen qualifying technologies and plant or machinery meeting the energy-saving criteria in these technologies can qualify for the relief. The qualifying technologies and products are specified in the Energy Technology List. The original list, prepared for the launch of the scheme was issued on 1 April 2001. This has since been superseded by a number of later lists the most recent being issued on 19 July 2007 and coming into effect on 16 August 2007. Details of all the lists and the dates they took effect are set out below:
These lists contains details of the energy-saving criteria that must be met for each of the technology classes and lists of products that have been certified as meeting those standards. There are some exclusions and certain expenditure does not qualify for enhanced capital allowances, in particular
When is the allowance available? Expenditure on qualifying combined heat and power (CHP), boilers, motors, variable speed drives, refrigeration equipment, thermal screens, lighting or pipework insulation can qualify for 100 per cent first year allowances if it is incurred
Expenditure incurred from 17 April 2002 on energy-saving equipment for leasing, letting or hire can qualify for 100 per cent first year allowances. Expenditure can qualify for ECAs where it is incurred on background energy-saving plant and machinery where it is provided under a lease where the plant and machinery is a fixture in a building. Expenditure incurred on or after 5 August 2002 can qualify for 100 per cent first-year allowances if it is incurred on qualifying heat pumps for space heating, radiant and warm air heaters, solar thermal systems, compressed air equipment or refrigeration display cabinets and compressors. Expenditure incurred on or after 5 August 2003 can qualify 100 per cent first-year allowances if it is incurred on qualifying automatic monitoring and targeting equipment. Expenditure incurred on or after 26 August 2004 can qualify for 100 per cent first-year allowances if it is incurred on qualifying air-to-air energy recovery equipment, compact heat exchangers or heating, ventilation and air conditioning zone controls. The qualifying technologies are specified in the Energy Technology Criteria List. The list is not fixed, it is periodically reviewed and technologies can be added or removed in the future. The scheme applies to plant and machinery in the following technology classes that meet the strict energy-saving criteria and the classes are as follows:
CHP installations are usually tailor made for a particular application and have to meet the criteria set out in the Energy Technology Criteria List. Each installation needs to be certified. This certification could take place either on the basis of the design of the plant or machinery, or on installation. The Energy Technology Criteria List sets out the required energy-saving standards for qualifying lighting and pipe insulation. Businesses can claim 100 per cent FYAs if the equipment meets these standards. Neither the product nor the installation needs to be separately certified. A person wanting to claim 100 per cent FYAs will need to ensure they can demonstrate that the relevant standards have been met, for example by seeking confirmation from the installer that the installation meets the relevant standards. (Additionally the lighting must qualify as plant and machinery, see CA21180 for further information.) Boilers, motors, variable speed drives, thermal screens, refrigeration equipment (including display cabinets and compressors added from 5 August 2002) heat pumps for space heating, radiant and warm air heaters, solar thermal systems, compressed air equipment, air-to-air energy recovery equipment, compact heat exchangers and heating, ventilation and air conditioning zone controls Technologies in these classes can qualify if the particular item is included on the Energy Technology Product List at the time the expenditure is incurred, or the contract for purchase is entered into. The product list contains those products in the technology classes that have been accepted as meeting the energy-saving standards. Neither the product nor the installation needs to be separately certified. In the case of solar thermal systems, either the whole system (for factory-built systems) or the solar collector (for bespoke systems) must be on the product list. Please see further information on the technology classes and qualifying products. Automatic monitoring and targeting equipment (AMT) Portable AMT equipment can qualify if the particular item is included on the Energy Technology Product List at the time the expenditure is incurred, or the contract for purchase is entered into. Component-based AMT systems can be tailor made for a particular business to enable it to identify and rectify energy wastage. Systems comprising meters, a meter reading system and analytical software can qualify where they meet the criteria set out in the Energy Technology Criteria List. Systems need to be certified as meeting the qualifying criteria Claiming 100 per cent FYAs for energy-saving plant and machinery There are no special rules for claiming 100 per cent FYAs. The allowances are claimed in the business's income or corporation tax return in the same way as claims for other capital allowances. |
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