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In his March 2001 budget speech, the Chancellor announced a proposal for 100% first year allowances known as Enhanced Capital Allowances (ECA) for qualifying expenditure on Energy Saving Plant and Machinery.
Manufacturers can now register products which qualify at a DEFRA website, and purchasers can refer to this list, at www.eca.gov.uk.
Specifications of qualifying products are available by clicking on the Supplier button, selecting an item from the drop down list, and clicking the Go button.
Claims to relief for Income Tax and Corporation Tax are both made under the Self Assessment regulations, but we recommend obtaining written confirmation that the product qualifies for ECA from the manufacturer or supplier. This can then be used to identify qualifying expenditure and provide evidence in the event of an enquiry by the Inland Revenue.
ECA only applies to new plant and machinery for use in the taxpayers business. It does not include equipment acquired for leasing to other businesses. Expenditure must have been incurred on or after 1 April 2001.
Expenditure on plant and machinery which does not qualify for ECA will normally attract a writing down allowance at 25% per annum on the reducing balance. Small and medium sized companies may claim a 40% first year allowance. 100% Capital Allowances are available on computer equipment, photocopiers used as printers on a network, web site development, and software purchased before 31 March 2003.
The allowances reduce the amount of assessable income on which tax is charged.
More details are available at http://www.inlandrevenue.gov.uk/capital_allowances/eca_guid_cont.htm.
The list of qualifying items has been extended to include expenditure from 5 August 2002 on refrigeration display cabinets, heat pumps for space heating, radiant and warm air heaters and compressed air equipment.
Reminder - disclaimer applies. Please feedback your comments. This page was last modified 25 October 2002.