Enhanced Capital Allowances

Here, 100% of the initial outlay on LED lights is offset against profits In year one.

How to claim an ECA for listed energy saving products

The ECA scheme provides a 100% first-year allowance for investments in certain energy saving plant and machinery. It lets you write off, for example, deduct - 100% of the cost of qualifying plant and machinery against taxable profits in the year of purchase.

You should claim ECAs for energy saving equipment in the same way that you claim other FYA. This is through your Self-Assessment Tax Return or your Corporation Tax Return.

If you need help making your claim for ECAs, you should contact your tax adviser or call the HM Revenue & Customs (HMRC) Self Assessment Helpline.

Contact details for HMRC Self Assessment Helpline
Capital allowances on plant and machinery

Non-listed products

Some products, known as non-listed products, do not appear on the Energy Technology List (ETL) but do meet the criteria and still qualify for an ECA. See the section below on how to claim an ECA for non-listed energy saving products.

Claim values

Some products on the ETL are designed to be incorporated into other items of plant or machinery. If this is the case, the proportion of your expenditure which can qualify for 100% FYA must be identified. This is known as the claim value.

The proportion of the cost of buying the plant and machinery that qualifies for 100% FYA will be the claim value amount specified in the ETL for the particular qualifying product that's been incorporated. The balance of the expenditure incurred does not qualify for 100% FYA, but it can still qualify for capital allowances at the relevant rate.

If you pay for the equipment in installments, you will need to calculate the amount qualifying for 100% FYA at each stage. You should do this by comparing the total cost with the expenditure that will qualify for 100% FYA. You apply this fraction to each payment to get the part of each payment that qualifies for 100% FYA.

For example, you buy a piece of equipment costing £90,000 which incorporates a qualifying component. The claim value for the environmentally beneficial component is £18,000. If you pay for the equipment in three installments - one of £40,000 and two of £25,000 - the calculations of which parts of the payments qualify for 100% FYA are as follows:

• £40,000 × £18,000 ÷ £90,000 = £8,000
• £25,000 × £18,000 ÷ £90,000 = £5,000
• £25,000 × £18,000 ÷ £90,000 = £5,000