Does the tax man know you have installed IE3 or IE4 compliant motor drives?
Many manufacturers know the benefit of getting a capital allowances specialist to review the tax relief available on a new factory. But have you ever considered the benefit of doing a proper review of your plant and machinery which has been acquired in the last two accounting periods?
Why can the tax treatment of manufacturing plant be important? Well, did you know that motor drives are estimated to consume two thirds of the electricity used by UK industry? Or that recent changes in minimum standards of efficiency have caused manufacturers to make their motors more efficient? If you have recently replaced inefficient or worn out motor drives, did you consider the tax treatment?
Under the UK’s capital allowances provisions certain environmentally efficient technologies can qualify for a 100% writing down allowance in the year of acquisition. Even better, for “tax loss” making companies the capital allowances can even be surrendered for a cash rebate! Bearing in mind many profitable manufacturers may be in a “tax loss” position after claiming their R&D tax reliefs and Patent Box reliefs, this can add to the cash rebates achieved by having a thorough understanding of what has gone into plant and identifying items where Enhanced Capital Allowances can increase the rebate.
You may be aware that certain energy efficient lighting and heating is also able to qualify, and even water efficient toilets! However, what is likely to be more important for a manufacturer, many motor drives and control systems (in particular many items meeting recent energy efficiency standards) can qualify. In addition, certain industrial cooling and refrigeration technologies can also qualify.
Whilst most commercial property landlords will be aware they can claim these, in our experience many manufacturers are unaware of the importance of thoroughly analysing the plant which is in their factories to understand what can be classified as ‘qualifying’ for the Enhanced Capital Allowances scheme.
Where qualifying energy efficient products are incorporated in a larger item and so the cost cannot be separately identified HMRC have provided a table of costs which can be allocated to the energy efficient item. This means that purchasers can claim ECA’s even if the energy efficient item is only (an unidentified) part of the invoiced cost.
If your business has recently bought new lighting or heating, or has bought motor drives or industrial refrigeration equipment, it might be financially beneficial to check that your assets are working as efficiently as possible tax wise as well as energy wise!
If you would like more information, please contact Rachel Marsdin on 0n 01524 62801.