ECA
The Enhanced Capital Allowance (ECA) scheme is a key part of the Government’s programme to manage climate change. It provides businesses with enhanced tax relief for investment in equipment that meets published energy-saving criteria – this includes refrigeration equipment.
The scheme allows businesses to claim 100% first-year capital allowance on investment in energy-saving equipment, against taxable profits in the year of investment.
In general the rate of tax allowance for ‘writing off’ is 20% p.a. thus most equipment takes years to write off. If however you are buying ECA approved equipment then you can claim 100% first year capital allowance against the taxable profit during the year of investment against its purchase. This gives an immediate cash flow boost.
Cost of qualifying equipment to use in year of purchase.
Cost of energy saving unit = £2,500
Less Tax saving arising from investment
(Year 1 (£2,500 @ 100% Allowance at 28% Corp Tax) = (£700)
Net cost of Energy Saving Unit = £1,800
Cost of NON qualifying equipment to use in year of purchase.
Cost of energy saving unit = £2,500
Less Tax saving arising from investment
(Year 1 (£2,500 @ 20% Allowance at 28% Corp Tax) = (£140)
Net cost of Energy Saving Unit = £2,360
Cash Flow saving in Year 1 = £560
Please contact us if you are interested in purchasing ECA compatible refrigeration equipment.
Note: The above assumes a corporation tax rate of 28% and tax relief assuming no Annual Investment Allowance.