Investing in energy-saving equipment does more than just save your business money. It’s often more tax efficient.

Enhanced Capital Allowances (ECAs) are a straightforward way for a business to improve cash flow through accelerated tax relief. 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 provides businesses with 100% first year tax relief on their qualifying capital expenditure. The ETL specifies the energy-saving technologies that are included in the ECA scheme. The 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.

How it works
If your business pays corporation tax at 30%, every £1,000 spent on qualifying equipment would reduce its tax bill in the year of purchase by £300. In contrast, for every £1,000 spent the generally available capital allowance for spending on plant and machinery* would reduce your businesses tax bill in the year of purchase by £75. In other words, an ECA can provide a cash flow boost of £225 for every £1,000 it spends in the year of purchase**.

Improve you bottom line
For more information about the scheme, read the ECA scheme for energy-saving technologies brochure or visit the ECA website to check the eligibility of equipment via the Energy Technology List (ETL).

* 25% a year on the reducing balance basis.
** 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.