Manufacturers have warned that the Chancellor’s decision to axe the first year tax relief on energy efficient equipment from 2020 will give specifiers only a limited time left to benefit. As part of the 2018 Budget, the Chancellor announced the closure of the enhanced capital allowances (ECA) scheme from April 2020. Businesses looking to invest in energy efficiency measures should plan now to take full advantage of tax relief opportunities, warned heating manufacturer Remeha.
The decision to close the ECA scheme will end the first year allowance on the Energy Technology List (ETL) and the Water Technology List (WTL), including the associated first year tax credit, from April 2020 onwards.
Paul Arnold, Product Manager at Remeha, said: “The ECA is a popular scheme that has been in place since 2001 to encourage the manufacture and uptake of increasingly energy-efficient products and technologies. Energy efficiency is one of the most cost-effective ways for businesses to improve the energy performance of their buildings. As a large user of energy in a building, heating is frequently a starting place for efficiency measures. And by providing accelerated tax relief on higher energy-efficient equipment, the ECA has helped businesses take a whole-life approach to costing for greater long-term energy and emissions savings.”
While businesses will still have an annual investment allowance (AIA) which will increase to £1 million in 2020, the manufacturer advises that firms plan and budget their energy efficient upgrades for the next year. Mr Armold added: ”This will allow them to take advantage of tax relief for ETL products via the ECA if the AIA maximum has already been met.”
First year allowance schemes currently allow 100 per cent of the costs of the investment in qualifying equipment to be written off against the taxable income of the period in which the investment is made. There is no cap on the amount that can be claimed for profit-making businesses. Qualifying costs include the installation and transportation costs in addition to the cost of the equipment.