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 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 machinery1 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 purchase2.
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.
The Energy Technology List (ETL) is comprised of two lists; the energy technology criteria list (ETCL) and energy technology product list (ETPL). The ETCL presents the energy-saving performance criteria that ECA qualifying equipment must meet. Whereas the ETPL is a register of products that have been assessed as being compliant with ETCL criteria. Lighting and pipework insulation equipment are not listed on the ETPL; spending on lighting and pipework insulation
plant and machinery which meets the appropriate criteria in the ETCL can qualify for an ECA. Businesses should therefore seek confirmation from their lighting or pipework insulation installer that the equipment complies with ETCL criteria prior to purchase. Component based automatic monitoring and targeting (AMT) equipment and combined heat and power (CHP) equipment are also not listed on the ETPL. However, in these instances businesses are required to verify ECA
compliance by having their equipment design assessed and a DEFRA certificate of energy-efficiency issued.
Further information on how to do this can be found at the ECA scheme website at www.eca.gov.uk/etl/claim/ non-listed.htm
For all other technologies, products are listed on the ETPL.
The ETPL lists over 15,000 energy-saving products and you can check to see if your purchase qualifies by visiting www.eca.gov.uk/energy or www.carbontrust.co.uk/eca
1. Check it’s on the Energy Technology List
1 20% a year on the reducing balance basis.
2 ECAs provide 100% tax relief, so there is no further tax relief in later years. The general rate of capital allowances does not provide 100% tax relief so there is a balance of spending to carry forward on the reducing balance basis for relief in later years
If your business is thinking of investing in energy-saving plant or machinery then the following technologies are specified in the ETL. The ETL is periodically reviewed and technologies can be added or removed. Within each technology area there can be multiple sub-technologies.
• Air-to-air energy recovery
• Automatic monitoring and targeting (AMT)
• Boiler equipment
• Combined heat and power (CHP)
• Compressed air equipment
• Compact heat exchangers
• Heat pumps for space heating
• Heating, ventilation and air conditioning (HVAC) zone controls
• Lighting
• Motors and drives
• Pipework insulation
• Radiant and warm air heaters
• Refrigeration equipment
• Solar thermal systems
The Carbon Trust offers interest free Energy-Efficiency Loans for the purchase of energy-saving equipment. Loans and ECA can be used together. Loans are a cost effective way to replace or upgrade your existing equipment with a more energy efficient version. Small and medium sized enterprises can borrow from £5,000 to £100,000* on an unsecured basis and payable over a period of up to four years. There are no arrangement fees and applying is straightforward.
*Subject to eligibility. Regional variations apply.