Understanding Enhanced Capital Allowance (ECA)
The government’s Enhanced Capital Allowance (ECA) Scheme is a straightforward way for businesses to improve their cash flow through accelerated tax relief.
It was introduced to encourage businesses to invest in energy-saving technologies, which can help reduce operating costs.
WHAT IS THE ECA SCHEME?
The ECA scheme enables companies to claim Corporate Tax Relief on 100% of the total cost of an approved energy efficiency technology in the first year after installing it.
This accelerates the cash flow from tax relief on energy efficiency assets.
ECAs can therefore bring significant economic advantage to businesses and, depending on cost per capital, ECA is worth in between 5% and 10% of the capital cost.
WHAT TECHNOLOGY IS ELIGIBLE?
The full and regularly updated Energy Technology List can be found here.
♦ Combined heat and power
♦ Boiler systems
♦ Variable speed drives
♦ Lighting systems
♦ Refrigeration equipment
♦ Pipe insulation
♦ Thermal screens
Note: ECA only applies to new equipment and cannot be applied to existing or second hand technology.
WHAT COSTS ARE COVERED IN ECA?
◊ Actual purchase cost of the equipment
◊ Transportation and installation costs
◊ Alterations to an existing building
◊ Professional fees directly associated with the installation of the equipment
Here at IU Energy we have put together our key takeaways from ECA:
♦ “You don’t think you have the cash – but you do”
ECA makes the case for energy efficiency drives more financially viable and attractive, giving businesses options for further investment.
♦ “By adopting an integrated, instead of isolated, energy strategy you are allowing for higher savings to be made across the energy spectrum.”
♦ “You are agreeing to losing money by not claiming ECA where applicable”
Our advice: understand financial tools around what you can claim.