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.
CA vs ECA life cycle cost calculations