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ECA to end for energy and water efficient plant and machinery

It was announced in the 2018 budget that Enhanced Capital Allowances (ECA’s) and First Year Tax Credits (FYTC’s) will end in April 2020 for products on the energy technology list (ETL) and water technology list (WTL).

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The retained revenue will be used to fund the Industrial Energy Transformation Fund (IETF) , set up to help businesses with high energy use (such as energy intensive industries) cut both their energy costs and carbon emissions through investing in energy efficient and low-carbon technologies.

ECA’s were introduced in 2001 to incentivise businesses to use energy-saving plant and machinery, allowing them to write off 100% of the cost against taxable profits arising in the period in which the investment was made, or by providing a payable tax credit for loss-making businesses. Whilst the idea and intentions were great, initial uptake of the incentive was low and remained so, due mainly to the administrative burden in making a claim and the complex legislation on items which qualified.

As the Government announced that ECA’s will be abolished, they softened the blow by increasing the Annual Investment Allowance (AIA) for qualifying plant and machinery to £1m, with effect from January 2019.

At Innovation Tax, we urge businesses to consider their ECA & FYTC entitlement in order to maximise any benefit before the regime is abolished and so provide a free evaluation to both businesses and accountants, carrying out entitlement checks and assisting with claim preparation where applicable.

In addition to this, there are many local, regional and national grants available throughout the UK for companies investing in green technology. These vary in the type of support offered e.g. grant funding, vouchers and loans, with amounts ranging from £1,000 to £35,000. Companies seeking to enquire on the availability of grants can contact Innovate UK directly, or get in touch with Innovation Tax who will be delighted to assist.