Enhanced Capital Allowances

Enhanced Capital Allowance has been introduced by the government to encourage end users of air conditioning systems to opt for inverter driven high efficiency systems when considering a new purchase, especially if the end user is considering a new heating system, the air conditioning heat pump system has a much higher COP or EER.

The terms COP (coefficient of performance) and EER (energy efficiency ratio) describe the heating and cooling efficiency of air conditioners. They indicate the ratio of heating or cooling provided by a unit relative to the amount of electrical input required to generate it. Thus, if an air conditioner generates 5kW of heat from a 1kW electrical input, its COP is said to be 5.0. Similarly, if an air conditioner generates 5kW of cooling from a 1kW electrical input its EER is also said to be 5.0. The higher the COP and EER, the more energy efficient is the equipment.

Why inverter?

We recommend inverter systems to many customer’s?,…. because they offer a much higher EER than conventional air conditioning systems with a wider range of suitable solutions for most applications. They are highly energy efficient, very quiet and can operate on a  240 volt, single phase supply, right up to 14 kW, this a major benefit to some of our customers, where available power, is restricted. This was not an option, until recently. Inverter driven systems, use around 30% less power, to run, than conventional Air Conditioning systems, therefore saving you money, by reducing Electricity bills.

Daikin, Mitsubishi. Toshiba, Hitachi, Fujitsu & Sanyo, produce many more, qualifying products, than any other, Air Conditioning, manufacturer. Very soon, you will notice ‘energy rating labels’ on all Air Conditioning condensers, similar to those, now familiar on Electrical white goods, such as fridges and washing machines.

Why Inverter driven, heat pump systems?

As a result, over recent years, of most major industrial countries, being required, to drastically reduce, CO2 emissions, we now only recommend and propose systems using R407c or R410a, refrigerant gases, to reduce ozone depletion. There are now, major further incentives, which are government lead, to concur with the Kyoto protocol, to further reduce CO2 emissions, by promoting the use of more efficient, means of heating. Inverter driven Heat Pump, Air Conditioning systems, are included within the qualifying criteria, to gain Enhanced Capital Allowances, as part of the Climate Change Levy. We have endeavoured to explain, these further major benefits, as follows.

Inverter driven Heat Pump, systems, are highly efficient to run, using far less energy, than conventional systems. They are slightly more expensive, as a capital cost, than conventional systems, due to the additional technology used. Because they use less energy, CO2 emissions are reduced, as less energy generation is required. A major element of the Climate Change Levy, is to encourage the use of, inverter driven Heat Pumps, wherever possible, by offering Enhanced Capital Allowances, to help offset, the initial capital cost of the installation.

How does the Enhanced Capital Allowance affect you?

Enhanced Capital Allowances (ECAs) are a straightforward way for a business to improve its cash flow through accelerated tax relief. The ECA scheme for energy-saving technologies encourages businesses to invest in energy-saving plant or machinery specified on the Energy Technology List (ETL) which is managed by the Carbon Trust on behalf of Government.

The ECA scheme provides businesses with 100% first year tax relief on their qualifying capital expenditure. The ETL specifies the energy-saving technologies that are included in the ECA scheme. The 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.

How it works

So if your business pays corporation 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 machinery* would reduce your business’ 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 purchase**.

Improve your bottom line

For more information about the scheme, read the ECA scheme for energy-saving technologies brochure (PDF) or visit the ECA website to check the eligibility of equipment via the Energy Technology List (ETL).

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.




Air Conditioning - Heating - Ventilation