Manufacturers warn on closure of capital allowances scheme

enhanced capital allowances, ECA, Energy Technology List, ETL, Paul Arnold, Remeha
Paul Arnold

In the 2018 Budget, the Chancellor announced the closure of the enhanced capital allowances (ECA) scheme from April 2020. Manufacturers of eligible equipment are warning businesses to take full advantage of tax relief opportunities.

The Government’s measure will end the first year allowance on the Energy Technology List (ETL) and the Water Technology List (WTL), including the associated first year tax credit, from April 2020 onwards. It will also update the lists of energy-efficient or environmentally beneficial products or technologies for 2019 to 2020 which are eligible for first-year allowances.

Paul Arnold, product manager at heating equipment specialist Remeha, says: “The ECA is a popular scheme that has been in place since 2001 to encourage the manufacture and uptake of increasingly energy-efficient products and technologies.

“Energy efficiency is one of the most cost-effective ways for businesses to improve the energy performance of their buildings. And by providing accelerated tax relief on higher  energy-efficient equipment, the ECA has helped businesses take a whole-life approach to costing for greater long-term energy and emissions savings.”

Under new rules, businesses will still have an annual investment allowance (AIA) of £200,000. But businesses looking to invest in energy efficiency enhancements are being advised to plan and budget in the next year to take advantage of tax relief for ETL products via the ECA if the AIA maximum has already been met.

The schemes currently allow 100% of the costs of the investment in qualifying equipment to be written off against the taxable income of the period in which the investment is made. There is no cap on the amount that can be claimed for profit-making businesses.

Qualifying costs include the installation and transportation.

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