Enhanced Capital Allowance ECA Scheme for Energy Saving Technologies

1. Enhanced Capital Allowance (ECA) Scheme for Energy Saving Technologies

2. Presentation Overview Enhanced Capital Allowances (ECA) for Energy-Saving Technologies Technology Groups What qualifies How to Claim Benefits Find a ETL Product

3. Enhanced Capital Allowance for energy-saving technologies The Carbon Trust manages the Energy Technology List (ETL) and promotion of the ECA scheme on behalf of Government. To help bring about a low carbon economy and reduce UK CO2 emissions by: Influencing the design, availability, and uptake of the most energy-efficient equipment types within the remit of the scheme; Promoting the ETL as a principal procurement tool for designers, specifiers and purchasers interested in energy-saving capital equipment.

4. Government�s ECA Scheme and the Carbon Trust�s Role

5. What type of equipment gets ECA scheme support ECA reviewing criteria submitted to EU (State aid No 797/2000 � UK): Energy-saving criteria to ensure products represents a significant improvement in energy performance over current standard [products] Market penetration criteria involves placing a cap so that products will be removed once market is established. �New technology� are those described in (1). ECAs are not intended to provide market confidence for products that are yet to be proven. However they can be used to stimulate technologies that have come to market, but which have not made a major impact

6. ETL � Technology Groups Air-to-air energy recovery Automatic monitoring and targeting equipment (2) Boilers (16) CHP Compact heat exchangers Compressed air equipment (4) Heat pumps for space heating (7) HVAC Equipment (2) Lighting (3) Motors and Drives (4) Pipe insulation Refrigeration equipment (14) Solar thermal systems Warm air and radiant heaters (2) Uninterruptable Power Supply

7. Product Distribution Curve

8. What spending can qualify for ECAs? The purchase price of products that comply with the ETL criteria and are listed on the ECA website www.eca.gov.uk/energy Or Technologies that comply with the ETL criteria; Lighting and Pipework insulation Or Technologies that comply with the ETL criteria and have been certified as doing so: Combined Heat and Power and component-based AMT Can include certain costs arising as a direct result of the installation of qualifying plant and machinery such as: - Transport of the equipment to the site - Direct installation costs

9. Four Steps to Claiming an ECA Chose a product that complies with the ETL criteria from the ECA website Make a capital purchase of energy-saving plant & machinery Obtain documentation to support your claim(s) for an ECA e.g. dated invoice and dated �ETL screen print� Claim the allowances on your business�s (as with other capital allowances) Further information from the Inland Revenue website www.hmrc.gov.uk/manuals/camanual/CA23100.htm IMPORTANT: Talk to your business�s accountant at an early stage Claim Values

10. Loss-making companies Loss-making companies can now also realise the tax benefit of their investment in ETL qualifying technologies with Payable ECAs by surrendering losses attributable to ECAs in return for a cash payment from the Government. The amount payable to any company claiming payable ECAs will be expressed as 19% of the loss that is surrendered. So if a company surrenders a loss of �100,000, the Payable ECA it will receive is �19,000. Payable ECAs will, however, be capped. The maximum credit claimable is limited by the total of the company�s PAYE and National Insurance payments for the year in which the claim is made or, if greater, �250,000.

11. Benefit to purchasers 100% first-year enhanced capital allowances (ECA) allow a greater proportion of the cost of an investment to qualify for tax relief against a business�s profits of the period of investment Provides financial incentive to end users Potentially reduce running costs though increased efficiency Reduce payback periods, and Reduced energy consumption means lower energy bills and reduced Climate Change Levy payments Reduces carbon footprint * assumes a company pays tax on profits at 28%

12. How much of an incentive is it?

13. How much of an incentive is it? The general rate of capital allowances for plant and machinery is 20% a year on the reducing balance basis. Relief is spread over a number of years. On �100 spent, in the year of purchase the effect of the allowances would to reduce the business�s tax bill by �5.60 (assuming company pays 28% tax on profits). 100% first-year enhanced allowances allow a business to write off all the qualifying spending against the taxable profits of the period of investment. On �100 spent, in the year of purchase the effect of the allowances would to reduce the business�s tax bill by �28 (assuming company pays 28% tax on profits).

15. Take-away Messages Straightforward to make a claim talk to your business�s accountant at an early stage comply with the ETL criteria capital purchase of plant & machinery complete tax return Financial benefits Help deliver your business�s corporate and social responsibility (CSR) Procurement policy should be built on life-cycle costs Help meet CCA targets and reduce climate change levy

16. More information from . . . ECA Scheme for energy-saving technologies Information for purchasers www.eca.gov.uk/energy Carbon Trust Advice Line on 0800 085 2005 or email customercentre@carbontrust.co.uk HM Revenue & Customs - Nick Williams www.hmrc.gov.uk/manuals/camanual/CA23100.htm Tel: 020 7147 2541 or Email: nicholas.williams@hmrc.gsi.gov.uk Other ECA Schemes www.eca-water.gov.uk