100% Tax Deductible Renewable Energy Technologies with the Enhanced Capital Allowance Scheme
This is a Government incentive which supports industries, businesses and public sector organisations who invest in certain energy-saving technologies by allowing them to cover 100% of the capital cost from their taxable profits of that year. This scheme, Enhanced Capital Allowance, (ECA) is designed to encourage organisations to improve energy efficiency and can only be used by those responsible for their own income or corporation tax self-assessment.
The Enhanced Capital Allowance scheme works in the same way as a claim for capital allowances. It can be used by any business holder when choosing to install an energy saving technology provided that it appears on DECCs official list of eligible technologies, the Energy Technology List (ETL).
The ETL is an exclusive list of what can be claimed through the ECA and claims should be based on the invoice value of the eligible product. For example, if an eligible product is contained within a larger product which is not specified on the ETL, only those which do appear on the ETL can be claimed – it is not inclusive of larger non-specified items. Within the ETL the items have a date when they were ‘added’ and ‘removed’. Claims will only be successful for items purchased after the ‘added’ date and/or before the ‘removed’ date. If the item is purchased after the removed date then it is no longer eligible for a claim. Usually, delivery and installation of eligible products can be included in the claim but it is advised that anyone planning to take part in the scheme checks the guidance in the Energy Technology Criteria List provided by DECC.
Technologies such as; White Light Emitting Diode Lighting Units; High Efficiency Lighting Units; Lighting Controls; Pipework Insulation; Automatic Monitoring and Targeting Systems are covered by the ETL but are not listed. For these products, purchasers will need to obtain a statement from the manufacturer to say that the product is covered at time of purchasing. This can then be used as evidence when making the tax claim.
The Enhanced Capital Allowance scheme does not cover Combined Heat and Power – this is a separate category. Businesses wishing to claim an ECA for CHP must first provide a Certificate of Energy Efficiency. Due to this added certificate being required, no CHP-specific products appear on the ETL.
Solar PV, Hydroelectric Power products and Wind Turbines are not included with the ECA as they are electricity-generating technologies rather than electricity-saving.
Driven by the need to meet the EU 2020 targets on energy efficiency, renewable energy and CO2 emission reduction, further government incentives are in place such as the Feed-in Tariff for Solar PV and the non-domestic RHI for renewable heating technologies like biomass boilers and heat pumps. These are provided as continuing incentives, but can not be claimed in addition to the ECA.
For further insight into how renewable energy technologies can be deployed within businesses and public sector organisations, take a look at Ecoliving's Commercial Case Studies.