If you are a business that pays income or corporation tax, you are able to claim capital allowances on energy-efficient plant and machinery. The Energy Technology Product List (ETL) is a government-managed list of energy efficient equipment and if you buy items on the ETL you can claims a 1000% first year capital allowance.
Investing in energy efficient equipment can reduce your energy bills and save you money in the medium/long term and you can also save tax on the purchase. Keep reading to learn more.
52 Ways to Save Tax – Part 22: Buy energy efficient equipment
The ETL is part of the Enhanced Capital Allowance (ECA) scheme for business. This means that if you are company that pays income or corporation tax, you can claim 100% first year capital allowances on products that feature on the list.
As part of its commitment to reduce carbon dioxide emissions, the government offers incentives to businesses to reduce their energy consumption. The Enhanced Capital Allowance (ECA) lets you claim 100% of your investment in energy efficient equipment against your taxable profits in the year that you buy the equipment.
What equipment is eligible for the tax saving?
For a product to be on the ETL, it must meet specific energy saving or energy efficiency criteria. These criteria are specific to the type of product.
Equipment that is included on the ETL includes:
- Boiler equipment
- Combined heat and power
- Compressed air equipment
- Heat pumps
- Heating, ventilation and air-conditioning equipment
- High speed hand air dryers
- Motors and drives
- Pipework insulation
- Refrigeration equipment
- Solar thermal systems
- Uninterruptible power supplies
- Warm air and radiant heaters
- Waste heat to electricity conversion equipment
How does the Enhanced Capital Allowance (ECA) scheme work?
The ECA scheme means that your business can invest in energy-saving plant or machinery that might otherwise be too expensive.
Under the ECA, your business can use the allowance to set 100% of the cost of the assets against your taxable profits in the tax year you buy them. This means that your company can write off the cost of the new energy efficient equipment against your taxable profits in that financial year.
An ECA is claimed through your business’s income or corporation tax return in the same way as any other capital allowance. HM Revenue and Customs is responsible for the tax-related aspects of the ECA scheme.
You can find more information about the range of energy efficient equipment that features on the ETL here. There is also a search function where you can find products that feature on the ETL and are therefore eligible for this tax-saving scheme.