Enhanced Capital Allowances
The part of the scheme relating to energy is administered by the Carbon Trust on behalf of the Government and is intended to promote the use of more energy efficient equipment in commercial buildings by offering an enhanced 100% tax relief. To qualify for the increased tax relief, items must either be on the energy technology list or meet some set performance criteria. It is important, therefore, to undertake appropriate due diligence and implement appropriate procedures early in a project if opportunities are to be optimised.
Failing to choose items in the ECA scheme does not mean a loss of tax relief, but the alternative rate for conventional equipment is generally a 10% per annum on a reducing balance basis and therefore, is a significant impact on cash flow. In addition to any ECA's, there is also the further benefit of lower running costs. The Carbon Trust also offer interest free loans of up to £100,000 to assist small to medium enterprises to purchase energy saving equipment.