Why its pays to renew in renewables
The holiday season is well underway, but as business owners no doubt many of you are already looking ahead to your winter refurbishment programmes.
If you are planning investment in your property than it’s worth finding out more about the Enhanced Capital Allowances (ECA) scheme that provides businesses with enhanced tax relief for investment in equipment that meets published energy-saving criteria.
There are three ECA schemes which provide enhanced tax relief for spending on equipment that has environmental benefits:
– Energy-saving plant and machinery
– Water conservation plant and machinery
– Low carbon dioxide emission cars
100 per cent first-year ECAs allow the full cost of an investment in designated energy-saving plant and machinery to be written off against the taxable profits of the period in which the investment is made.
You can normally spend up to £50,000 in a year and get 100 per cent tax relief via the annual investment allowance. After that the general rate of capital allowances for spending on plant and machinery is 20 per cent a year on the reducing balance basis, so investing in the right eco-friendly equipment can generate huge savings, presenting a welcome cashflow boost and shortened payback period.
For example, say you bought a biomass boiler for £5,000 you could save up to £2,000 in tax in your first year. If you purchased a conventional boiler for the same price, the saving would only be £400 if you had used up the £50,000 annual investment allowance on other equipment.
Speak to your professional advisor who will be able to tell you how you can benefit from Enhanced Capital Allowances. To view the Carbon Trust’s ECA criteria and product lists visit www.eca.gov.uk/etl