Enhanced Capital Allowances
Enhanced Capital Allowances (ECAs) are a 100% tax relief to encourage investment in certain qualifying energy and water saving technologies. ECAs were introduced in 2001 as part of the Government’s response to the Kyoto Protocol.
ECAs are available on new build expenditure, refurbishment work and even purchases; in all cases the plant must be new and unused.
Taxpayers who can benefit from ECAs include companies, individuals and partnerships in any of the categories listed below:
- Constructing buildings to hold as investments
- Constructing or renovating buildings for their own use
- Fitting out leased property for their own use
- Buying an unused building from a developer
Non-resident landlords can also claim ECAs.
ECAs are an important and expanding fiscal incentive that simply cannot be ignored when considering investment in commercial property.
ECAs are available on 14 energy saving technologies, each with their own eligibility criteria. Compliance with these criteria determines whether ECAs can be claimed on a particular piece of equipment. For some technologies this compliance results in qualifying equipment being listed on the ECA website. Others, such as lighting and pipework insulation, require certification from either the supplier (in the case of lighting), or the installer (in the case of pipework insulation) to support a claim.
Every year the Department of Energy and Climate Change (DECC) undertake a review of the energy saving technologies that qualify for ECAs to ensure they are still relevant. Any major changes are announced in the Budget, with smaller changes, issued in the summer. This results in new equipment being added to the list and equipment that does not meet the updated eligibility criteria being removed.
Design decisions will ultimately affect claim values, although such decisions should never be made purely for tax reasons. It is possible, however, to work in partnership with the architect and mechanical and electrical services consultant to achieve a tax effective and energy efficient solution.
Day to day administration of the energy technology list is undertaken by the Carbon Trust on behalf of DECC.
Energy Technology List ECA Scheme
One area that is often overlooked is the availability of 100% ECAs on certain qualifying water saving technologies. In water intensive sectors such as hospitality and residential care, significant savings can be made by specifying the correct make and model of equipment.
As design and build contracts continue to be the procurement route of choice in a broad range of sectors, the contractor has a vital role to play. They are in the prime position to not only design a water efficient installation, but also provide the necessary back up that the end user needs to support a claim for ECAs.
Ultimately the design decisions made early in a project will affect claim values, however, it is possible to work proactively with the project team to achieve a tax effective and water efficient solution.
Day to day administration of the water technology product list is undertaken by the Department for Environment Food and Rural Affairs.
Water Technology Product List
Further Information on ECA
For further information on ECAs relating to energy and water saving technologies, please click on the relevant link below