Benefits

The Enhanced Capital Allowance (ECA) scheme can bring significant financial savings, in the short and long-term, as well as improving a company’s energy-efficiency and its impact on the environment.

An immediate cash-flow boost
An ECA provides 100% tax relief on any investment in energy-saving equipment, in the same tax year as the purchase is made. This means a business paying corporation tax at 28% will receive 28p tax relief for every £1 invested in energy-saving products.

If the equipment isn’t on the Energy Technology Product List (ETPL), or doesn’t meet the relevant criteria, the most a company can claim is 20% tax relief, which works out at only 5.6p for every £1. So, in effect, an ECA provides a cash-flow boost of 22.4p for every pound invested.

The financial benefit will be different if a company is paying income tax, or if it has a different marginal rate of corporation tax.

Another benefit of the scheme is that it reduces the payback period on the initial investment.

Lower long-term energy costs
As well as the added tax incentive, investing in energy-saving equipment could reduce a company’s energy bills, as it has lower running costs. This will also reduce a company’s Climate Change Levy (see the graph below), so there are significant long-term savings to be made from the initial investment.

An environmentally friendly reputation
Investing in energy-saving equipment shows a commitment to reducing carbon emissions, and can increase a company’s appeal with both customers and investors.

Many people now look at how environmentally friendly a company’s policies and production methods are, before deciding to invest in it or its products and services.

So as well as helping the environment, it also makes good business sense to proactively reduce energy usage.