Are You Missing Out?

The ECA Scheme for Energy Saving Technologies encourages businesses to invest in energy-saving plant or machinery specified on the Energy Technology List (ETL) which is managed by the Carbon Trust on behalf of Government.

The ECA scheme allows businesses to write off the whole cost of the equipment against taxable profits in the year of purchase.  This can provide a cash flow boost and an incentive to invest in energy-saving equipment which normally carries a price premium when compared to less efficient alternatives. The ETL specifies the energy-saving technologies that are included in the ECA scheme.

So if your business pays corporation or income tax at 28%, every £1,000 spent on qualifying equipment would reduce its tax bill in the year of purchase by £280. In contrast, for every £1,000 spent, the generally available capital allowance for spending on plant and machinery would reduce your business’s tax bill in the year of purchase by £56. In other words, an ECA can provide a cash flow boost of £224 for every £1,000 it spends in the year of purchase.

Loss-making companies can now also realise the tax benefit of their investment in ETL qualifying technologies with Payable ECAs by surrendering losses attributable to
ECAs in return for a cash payment from the Government.

The amount payable to any company claiming payable ECAs will be expressed as 19% of the loss that is surrendered. So if a company surrenders a loss of £100,000, the Payable ECA it will receive is £19,000. Payable ECAs will, however, be capped.
The maximum credit claimable is limited by the total of the company’s PAYE and National Insurance payments for the year in which the claim is made or, if greater, £250,000.