Enhanced Capital Allowances

Enhanced Capital Allowances

Tax Relief for Businesses Investing in Technologies Benefiting Water Use and Quality

www.eca-water.gov.uk

The ECA Scheme

• What is the Enhanced Capital Allowance (ECA) scheme designed to do?

• What are they worth to companies?• Which products and technologies can

qualify?• How to claim• How can you find out more about

ECAs?


The ECA Scheme - Aims

•To encourage businesses to invest in more sustainable water technologies

•By providing fiscal incentive to users and

•By providing a marketing tool for manufacturers, thereby encouraging innovation


The ECA Scheme

ECAs provide:• Fiscal incentives to users designed to

encourage companies to choose water efficient and water quality enhancing products and technologies

• Tax relief on qualifying investments within one year, delivering significant cash flow boost and shortening the payback period on investment


The ECA Scheme

Products and technologies qualifying for an ECA are listed on the Water Technology List and encourage sustainable water use

They deliver significant long-term financial benefits – e.g. just by being water efficient - over and above the enhanced tax relief


How much of an incentive is it?

Assuming there are sufficient profits for the Capital Allowances to be written off against and a Corporation Tax rate of 30%:

• Capital Allowances are a benefit of £7.50 for every £100 spent

• 100% First Year Allowances (or ECAs) are benefit of £30 for every £100 spent

• All allowances due in first year – positively affecting cash flow

• Additional benefits over 10 years


How the rates of relief compare

Year Expenditure written off against profits

Normal Rate (25%)

SMEs Rate (40% then 25%)

100% ECA

1 2 3 4 5 6 7 8 9 10

25.0 18.8 14.1 10.5 7.9 5.9 4.4 3.3 2.5 1.9

40.0 15.0 11.3 8.4 6.3 4.7 3.6 2.7 2.0 1.5

100 - - - - - - - - -


The Water Technology List

Details of qualifying products and technologies can be found on the Water Technology List, which is in two parts:–Water Technology Criteria List

• Published in July 2003• Sets out the technologies and their specific criteria• Reviewed on an annual basis

–Water Technology Product List• Published Autumn 2003• Lists all qualifying products on which the tax relief

can be claimed • Updated monthly


Specific qualifying products and technologies

• Meters and monitoring equipment• Flow controllers• Leakage detection equipment• Efficient toilets• Efficient taps• Rainwater Harvesting Equipment


How do suppliers get their products listed?

• Full Water Technology Criteria List is available on the website

• Online application process• Send supporting evidence to Defra• Takes about 1 month to process an application• Supplier will be informed if the product meets

the criteria• Successful products will be published on the

Water Technology List


How much can businesses claim?

•The price paid for a new product•Costs directly associated with the installation of

the kit •For more details see www.eca-water.gov.uk or

www.inlandrevenue.gov.uk

Claims can be made only for products appearing on the Water Technology List at the time of investment


ECA Marketing Support

The Government• Can’t overtly promote any specific products or

technologies as qualifying for ECAs• But can promote the products and

technologies on the Water Technology List as meeting the criteria to enable ECA claims



• The Water Technology List symbol– A new symbol for manufacturers to use to

signal that a product or technology is included on the Water Technology List.

• This will signal:– Approved sustainable water use

performance/product differentiation – Water efficient performance/ reduced water

costs– Opportunity for end users to claim the tax

benefits



• Marketing programme to manufacturers– To encourage you to use the WTL symbol to

support sales development activities e.g. on literature, tenders, invoices

• Marketing programme to Trade Associations– To encourage members to apply for/use the

WTL symbol• Marketing programme for business advisors

– To encourage end users to look for the WTL symbol when making procurement decisions



• Events– Designed to raise awareness of ECAs and

the WTL symbol– Through trade associations– Envirowise event programmes targeting

• SMEs• Finance• Procurement• Boardroom


The Future

• Scope is being continually expanded – details of new products and technologies will be featured on the ECA web site

• Development of water quality enhancing technologies

• Information online on how to make Defra aware of technologies which could be considered for addition to the Water Technology Criteria Lists in the future


Other sources of Useful Information

www.envirowise.gov.uk

www.defra.gov.uk

www.inlandrevenue.gov.uk

Environment and Energy Helpline

0800 585794

Enhanced Capital Allowances

Documents

Transcript of Enhanced Capital Allowances