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ECA stands for the Enhanced Capital Allowance Scheme which allows businesses to claim 100% first year allowances on certain energy efficient product purchases. Businesses can receive tax relief equal to the value of the components which qualify within a product. The applicability of components for the scheme is based on their energy efficiency for example in a lighting tower it will be luminaire, light source and control gear. Sound interesting?
View ECA InfographicIt may be, however, there are a number of considerations which impact on the amount which can be claimed. And, there is a lot of misinformation going around about this government scheme and how businesses can benefit.
To cut through what is FACT and what is FANTASY here’s FIVE top tips …
1. The customer benefits 100% corporation tax relief of the value of components applicable for the scheme in the year of purchase, for example if the eligible component parts equate to £2,800, 19% of this would be £550 worth of relief.
2. The AIA (Annual Investment Allowance) is another form of tax relief allowing businesses to claim 100% first year allowances on £200,000 of business equipment - regardless of the energy efficient credentials of the product. In order for the ECA to be of benefit to a company, it must have exhausted its AIA allowance first. This means the ECA scheme is rarely applicable to small companies. Note: The AIA amount has temporarily increased to £1 million between January 1, 2019 and December 31, 2020.
3. This scheme comes to an end on the 31 March 2020.
4. In order to market and benefit from this scheme there are certain requirements about providing evidence to the customer about the credentials of the product. Always double check with your supplier the exact details to ensure your claim is valid.
5. For any query on ECA and more information about Morris Site Machinery products applicable to the ECA scheme, contact: Richard Denholm on 0345 409 0280 or email: firstname.lastname@example.org.
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