Enhanced Capital Allowance (ECA) Scheme for Energy Saving Technologies

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Enhanced Capital Allowance (ECA) Scheme for
Energy Saving Technologies
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Presentation Overview

• Enhanced Capital Allowances (ECA) for
  Energy-Saving Technologies
• Technology Groups
• What qualifies
• How to Claim
• Benefits
• Find a ETL Product

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Enhanced Capital Allowance for energy-saving
technologies

• The Carbon Trust manages the Energy Technology
  List (ETL) and promotion of the ECA scheme on
  behalf of Government.
• To help bring about a low carbon economy and
  reduce UK CO2 emissions by
• Influencing the design, availability, and uptake
  of the most energy-efficient equipment types
  within the remit of the scheme
• Promoting the ETL as a principal procurement tool
  for designers, specifiers and purchasers
  interested in energy-saving capital equipment.

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Governments ECA Scheme and the Carbon Trusts
Role
ECA Scheme

• ECA tax Breaks
• Claimed on tax return
• Administered by HMRC

ETL (qualifying equipment)

• Criteria List (ETCL)
• Performance criteria
• Categories of equipment
• Split into Technology Groups Sub-Technologies
• Updated annually

• Product List (ETPL)
• All qualifying products
• Uniquely identifiable
• Manufacturer self-certification and Carbon Trust
  assessment
• Updated monthly

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What type of equipment gets ECA scheme support

• ECA reviewing criteria submitted to EU (State
  aid No 797/2000 UK)
• Energy-saving criteria to ensure products
  represents a significant improvement in energy
  performance over current standard products
• Market penetration criteria involves placing a
  cap so that products will be removed once market
  is established.
• New technology are those described in (1). ECAs
  are not intended to provide market confidence for
  products that are yet to be proven. However they
  can be used to stimulate technologies that have
  come to market, but which have not made a major
  impact

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ETL Technology Groups

• Air-to-air energy recovery
• Automatic monitoring and targeting equipment (2)
• Boilers (16)
• CHP
• Compact heat exchangers
• Compressed air equipment (4)
• Heat pumps for space heating (7)
• HVAC Equipment (2)
• Lighting (3)
• Motors and Drives (4)
• Pipe insulation
• Refrigeration equipment (14)
• Solar thermal systems
• Warm air and radiant heaters (2)
• Uninterruptable Power Supply

Businesses may claim 100 first-year capital
allowance
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Product Distribution Curve
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What spending can qualify for ECAs?

• The purchase price of products that comply with
  the ETL criteria and are listed on the ECA
  website www.eca.gov.uk/energy
• Or
• Technologies that comply with the ETL criteria
  Lighting and Pipework insulation
• Or
• Technologies that comply with the ETL criteria
  and have been certified as doing so Combined
  Heat and Power and component-based AMT
• 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
• - Direct installation costs

CARBON TRUST DO NOT PROVIDE TAX ADVICE
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Four Steps to Claiming an ECA

• Chose a product that complies with the ETL
  criteria from the ECA website
• Make a capital purchase of energy-saving plant
  machinery
• Obtain documentation to support your claim(s) for
  an ECA e.g. dated invoice and dated ETL screen
  print
• Claim the allowances on your businesss (as with
  other capital allowances)
• Further information from the Inland Revenue
  website
• www.hmrc.gov.uk/manuals/camanual/CA23100.htm
• IMPORTANT
• Talk to your businesss accountant at an early
  stage
• Claim Values

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Loss-making companies

• Loss-making companies can now also realise the
  tax benefit of their investment in ETL qualifying
  technologies with Payable ECAs by surrendering
  losses attributable to ECAs in return for a cash
  payment from the Government.
• The amount payable to any company claiming
  payable ECAs will be expressed as 19 of the loss
  that is surrendered. So if a company surrenders a
  loss of 100,000, the Payable ECA it will receive
  is 19,000.
• Payable ECAs will, however, be capped. The
  maximum credit claimable is limited by the total
  of the companys PAYE and National Insurance
  payments for the year in which the claim is made
  or, if greater, 250,000.

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Benefit to purchasers

• 100 first-year enhanced capital allowances (ECA)
  allow a greater proportion of the cost of an
  investment to qualify for tax relief against a
  businesss profits of the period of investment
• Provides financial incentive to end users
• Potentially reduce running costs though increased
  efficiency
• Reduce payback periods, and
• Reduced energy consumption means lower energy
  bills and reduced Climate Change Levy payments
• Reduces carbon footprint
• assumes a company pays tax on profits at 28

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How much of an incentive is it?
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How much of an incentive is it?

• The general rate of capital allowances for plant
  and machinery is 20 a year on the reducing
  balance basis. Relief is spread over a number of
  years. On 100 spent, in the year of purchase the
  effect of the allowances would to reduce the
  businesss tax bill by 5.60 (assuming company
  pays 28 tax on profits).
• 100 first-year enhanced allowances allow a
  business to write off all the qualifying spending
  against the taxable profits of the period of
  investment. On 100 spent, in the year of
  purchase the effect of the allowances would to
  reduce the businesss tax bill by 28 (assuming
  company pays 28 tax on profits).

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www.eca.gov.uk/energy
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Take-away Messages

• Straightforward to make a claim
• talk to your businesss accountant at an early
  stage
• comply with the ETL criteria
• capital purchase of plant machinery
• complete tax return
• Financial benefits
• Help deliver your businesss corporate and social
  responsibility (CSR)
• Procurement policy should be built on life-cycle
  costs
• Help meet CCA targets and reduce climate change
  levy

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More information from . . .

• ECA Scheme for energy-saving technologies
• Information for purchasers
• www.eca.gov.uk/energy
• Carbon Trust Advice Line on 0800 085 2005 or
  email customercentre_at_carbontrust.co.uk
• HM Revenue Customs - Nick Williams
• www.hmrc.gov.uk/manuals/camanual/CA23100.htm
• Tel [phone] or Email nicholas.williams_at_hmr
  c.gsi.gov.uk
• Other ECA Schemes
• www.eca-water.gov.uk