What is Enhanced Capital Allowance?
Enhanced Capital Allowance (ECA) is a government scheme designed to encourage businesses to invest in energy saving technology, resulting in reduced carbon emissions. It does this by improving cash flow through accelerated tax relief, for participating companies.
There are many types of technology that are suitable for the scheme, each with their own criteria for being deemed appropriate for the scheme. Details of these criteria can be found in the Energy Technology List (ETL). This list is reviewed annually, by the Carbon Trust, to ensure the technology it includes is the best available.
How to Claim
Any business that pays income or corporation tax is able to claim 100% first year capital allowance on a product that is included in the ETL at the time of purchase. This is done in the same way as claiming capital allowances.
What about Lighting?
Currently LED lighting is not listed in the ETL, but this does not mean they can’t qualify for the Enhanced Capital Allowances Scheme.
For lighting to qualify for the scheme it must meet certain criteria.
Firstly, the lamps in the fittings must not be replaceable. This means that products such as GU10 downlights and panel lights with replaceable LED ‘Tubes’ are not counted towards the scheme. Chip-on-Board lights are included in the scheme, as long as they meet the following energy criteria;
Amenity, accent and display lighting units
General interior lighting, using downlighting units
General interior lighting using uplighting units
General interior lighting using combined up and down lighting units
Exterior area lighting units
Exterior floodlighting units
As well as complying with the above requirements, for a product to qualify for Enhanced Capital Allowances must also have a Colour Rendering Index of Ra 80 for amenity, accent and display lighting and give out at least 90% of its lighting in the necessary direction.
If you are applying for Enhanced Capital Allowances for lighting, it is important to ensure that you ask your supplier to provide a document stating compliance on company headed paper, on the date of purchase. The customer can then submit this to HMRC along with the ECA claim.