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80 % reduction in energy costs

The Carbon Trust

Enhanced Capital Allowances (ECAs) are a
straightforward way for a business to improve its
cash flow through accelerated tax relief.
Carbon Trust

The ECA scheme allows businesses to write off the whole cost of the
equipment against taxable profits in the year of purchase. This 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. The ETL specifies the energy-saving
technologies that are included in the ECA scheme.

So if your business pays corporation or income tax at 28%, every £1,000
spent on qualifying equipment would reduce its tax bill in the year of
purchase by £280. In contrast, for every £1,000 spent, the generally
available capital allowance for spending on plant and machinery¹ would
reduce your business’s tax bill in the year of purchase by £56. In other
words, an ECA can provide a cash flow boost of £224 for every £1,000 it
spends in the year of purchase².


1 20% a year on the reducing balance basis.
2 ECAs provide 100% tax relief, so there is no further tax relief in later years. The general rate
of capital allowances does not provide 100% tax relief so there is a balance of spending to
carry forward on the reducing balance basis for relief in later years.
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