A business investing in a piece of technology from the Energy Technology List (ETL) will be allowed to offset the entire investment against taxable profits in the same financial year the acquisition is made.
The ETL comprises a definitive list of every qualifying product and it is updated regularly as new energy efficient products are included and other less efficient models are removed. The Carbon Trust promotes the ECA scheme for energy-saving technologies and manages the Energy Technology List (ETL) on behalf of Government.
The range of technologies included is very wide-ranging but it is important to highlight one important fact: just because a product may not feature on the list does not mean that it is not energy efficient. It may simply be that no application has been made for inclusion.
The ETL has two parts:
1) The Energy Technology Criteria List (ETCL) – which is reviewed annually to ensure that it reflects technological progress. It sets out the qualifying energy-saving criteria for each class of technology.
2) The Energy Technology Product List (ETPL) – updated at the start of each month, this lists the products that are eligible for an ECA. There are currently 15 main technology classes, each of which has one or more sub-technology classes within it:
To give you a flavour of the types of things that are included, here’s a list of the main product categories:
Finding out whether a product has been included is straightforward. Simply search for the product or manufacturer here: www.eca.gov.uk/etl.
ECA is open to all UK businesses that pay corporation or income tax, provided the equipment or product are listed and are new and unused. Interestingly the costs of transportation and installation can also be claimed.
ECA is claimed on a company’s tax return in the same way as other capital allowances. All documentation, such as invoices or dated screen prints from the ECA website, relating to the claim should be retained.
To illustrate how the ECA works, if your business has the option of buying a product that is not on the list for £5,000 or a similar listed product for £6000, the choice will be worthy of some consideration.
The cheaper product would actually have tax relief of:
£5,000 x 20% tax relief x 28% corporation tax = £280. Cost = £4720
The listed product would have tax relief of
£6,000 x 100% tax relief x 28% corporation tax =£1680. Cost = £4420
In the year of purchase the more expensive, listed product costs £300 less than ‘the bargain-buy’. The Enhanced Capital Allowance scheme way well be worth looking into.
To find out more about boosting business competitiveness by increasing energy efficiency, visit: www.tadea.com/energymanagementservice