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NEW ENHANCED CAPITAL ALLOWANCE EXPLAINED. The benefits and new requirements of the scheme The additional benefits of using energy efficient schemes.  How to overcome some of the barriers that prevent uptake of the ECA An industrial case study that successfully claimed the allowance

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Presentation Transcript
new enhanced capital allowance explained
The benefits and new requirements of the scheme

The additional benefits of using energy efficient schemes.

 How to overcome some of the barriers that prevent uptake of the ECA

An industrial case study that successfully claimed the allowance

An office lighting case study currently updating to LED which will meet the new requirements

NEW ENHANCED CAPITAL ALLOWANCE EXPLAINED
slide3
The scheme encourages businesses to invest in energy saving plant or machinery specified in the Energy Technology List (ETL) to help reduce carbon emissions, which contribute to climate change.ENHANCED CAPITAL ALLOWANCES (ECA’s) ARE A STRAIGHTFORWARD WAY FOR A BUSINESS TO IMPROVE ITS CASH FLOW THROUGH ACCELERATED TAX RELIEF.
slide4
ECA scheme only covers expenditure on energy efficient plant and machinery

Businesses can write off 100% of qualifying investments against corporation tax in the year in which they make the investment

First year cash flow boost designed to help address the higher purchase price of the more energy-efficient plant and machinery to enable the business to benefit from lower on-going energy bills

ECA criteria is used to specify energy efficient lighting

The aim is to support ‘best practice’ lighting (top 25%)

THE ENHANCED CAPITAL ALLOWANCE (ECA) SCHEME IS A KEY PART OF THE GOVERNMENT’S PROGRAMME TO MANAGE CLIMATE CHANGE.
slide5
ECA scheme covers expenditure on energy efficient plant and machinery

Businesses can write off 100% of qualifying investments against corporation tax in the year in which they make the investment

First year cash flow boost designed to help address the higher purchase price of the more energy-efficient plant and machinery to enable the business to benefit from lower on-going energy bills

ECA criteria is used to specify energy efficient lighting

The aim is to support ‘best practice’ lighting (top 25%)

THE ENHANCED CAPITAL ALLOWANCE (ECA) SCHEME IS A KEY PART OF THE GOVERNMENT’S PROGRAMME TO MANAGE CLIMATE CHANGE.

Building Regulations (required performance)

whats on the list
WHATS ON THE LIST

The ENERGY TECHNOLOGY LIST (ETL) is a register of products that are

eligible for 100% tax relief under the ECA scheme for energy saving technologies.

The Carbon Trust manages the list and promotes the ECA scheme

on behalf of the government.

The ETL comprises two lists:

Energy Technology CRITERIA List (ETCL)

Energy Technology PRODUCT List (ETPL)

The ETCL defines the performance criteria that equipment must meet to qualify for ECA support.

TheETPLis the list of products that have been assessed as being compliant with ETCL criteria.

However, lighting equipment is an exception to the rule and is not listed on the ETPL;

Lighting which meets the appropriate criteria in the ETCL can qualify for an Enhanced Capital Allowance.

benefits of purchasing energy technology list products
BENEFITS OF PURCHASINGENERGY TECHNOLOGY LIST PRODUCTS

Lighting products that comply with the criteria on the ETCL are highly energy efficient.

When replacing lighting, businesses are often tempted to opt for fittings with the lowest capital cost, However, such immediate cost savings can prove to be a false economy if the savings over the lifetime of the product not taken into account.

The ECA scheme provides 100% first year tax relief on qualifying capital expenditure.

If businesses can write off the whole cost of the equipment against taxable profits in the year of purchase it can provide a cash flow boost and an incentive to invest in energy saving equipment which normally carries a price premium when compared to less efficient alternatives.

Why claim?

If your business spends £10,000 on product specified on the ETLand you pay corporation tax at 23%, you could reduce your tax bill by £2,300 in the year of investment. The more you invest the more you can save, £100,000 investment would save you £23,000 on your tax bill. An ECA claim can include the purchase, transport and installation costs of energy‐saving equipment included on the ETL.

there are 3 categories i will concentrate on today
THERE ARE 3 CATEGORIES I WILL CONCENTRATE ON TODAY

High Efficiency Lighting Units (luminaires)

A combination of a light fitting (or luminaire), one or more lamps, and associated control gear.

White Light Emitting Diode (LED) Lighting Units

LED lighting units consist of one or more white LEDs, a light fitting (or luminaire) and associated electrical drive units. LED replacement lamps are not eligible for support.

Lighting Controls,

Including time switching, presence detection and daylight sensing.

(both switching and dimming)

eca eligibility criteria lumininaire efficacy
ECA - ELIGIBILITY CRITERIA Lumininaire Efficacy

Luminaire efficacy = Luminaire lumens

Circuit watts

LED luminaires are photometered in

Luminaire Lumens

= Luminaire Lumens

eca eligibility criteria1
ECA - ELIGIBILITY CRITERIA

All products must:

● Have a luminaire efficacy that is greater than, or equal to, the thresholds set out above, when tested after 100 hours of continuous operation.

● Have a power factor that is greater than, or equal to, 0.7 at all levels of product light output.

In addition:

 General lighting units installed indoors must comply with the glare and angular exclusion zone recommendations in paragraph 94 of HSG 38 (1997).

 Individual control gear must have a standby power not exceeding 0.5 Watts when the lighting unit incorporates an electronically addressed dimming or switching circuit. If the product is not fitted with an automatic switching or dimming circuit, the product must not consume power when it is switched off.

 Fluorescent and compact fluorescent lamps in all categories, and all lamps used in amenity, accent and display lighting units must have a colour rendering index that is at least Ra 80. All other lamps must have a colour rendering index of at least Ra 20.

 If the product incorporates dimming control it shall be tested at its highest light output level.

eca eligibility criteria2
ECA - ELIGIBILITY CRITERIA

All products must:

● Have a luminaire efficacy that is greater than, or equal to, the thresholds set out below, when tested after 100 hours of continuous operation.

● Have a power factor that is greater than, or equal to, 0.7 at all levels of product light output.

In addition:

 General lighting units installed indoors must comply with the glare and angular exclusion zone recommendations in paragraph 94 of HSG 38 (1997).

 Individual control gear must have a standby power not exceeding 0.5 Watts when the lighting unit incorporates an electronically addressed dimming or switching circuit. If the product is not fitted with an automatic switching or dimming circuit, the product must not consume power when it is switched off.

 Fluorescent and compact fluorescent lamps in all categories, and all lamps used in amenity, accent and display lighting units must have a colour rendering index that is at least Ra 80. All other lamps must have a colour rendering index of at least Ra 20.

 If the product incorporates dimming control it shall be tested at its highest light output level.

Skip to the interesting bit............

what are the barriers to claiming eca
WHAT ARE THE BARRIERS TO CLAIMING ECA?
  • The supply chain can be long and disjointed, so it can prove difficult to obtain the correct evidence to use with the tax claim.
  • The company might not be making profit.
  • Why bother when you can right it off in the traditional way?
  • ECA compliance needs to be written into the spec to avoid value engineering below the required energy efficacy level.
  • Remembering to claim.
john guest case study
JOHN GUEST CASE STUDY

Founded by John Guest in 1961, the family owned company has grown to become the world leader in push-fit plastic fittings for the plumbing and heating industry

john guest case study4
JOHN GUEST CASE STUDY

For a capital outlay of £57,000 plus installation costs

144 tonnes CO2 p/a

£20,000 per year in energy costs

76% energy reduction

trilux house case study
TRILUX HOUSE CASE STUDY

Refurbishment of our own offices

All of the offices have now had the luminaires replaced by LED products that are daylight and presence linked

trilux house case study3
TRILUX HOUSE CASE STUDY

Alternatively lit to EN12464

with free standing uplights

trilux house case study9
TRILUX HOUSE CASE STUDY

Total expenditure on changing to LED

Luminaires £25,000

Installation costs £ 5,000

Total £30,000

Therefore we will claim 23% on our end of year tax return = £6,900