Recent updates to the Carbon Trust Enhanced Capital Allowances (ECA) system may only represent minor tweaks but maintain a significant cash boost for the investment in a wide variety of property assets, from boilers and lighting to rainwater harvesting. This often forgotten cash back government incentive, if considered at the outset of any construction project, can significantly reduce net project costs.
The Carbon Trust’s Energy Technology list (ETL) https://etl.beis.gov.uk/engetl/fox/live/ETL_PUBLIC_PRODUCT_SEARCH details all assets on which ECAs can be claimed against, with the big-ticket expenditure items being:
- Lighting and HVAC controls
- Air conditioning units
- Pipework insulation
- Energy monitoring
- Water saving technology
Once you have identified that your project includes some of these assets, the product selected then must meet the specific performance criteria set for that asset category. This is often where the claim process falls down, as it will require that product to either be listed or certified as compliant by the individual supplier at the time the expenditure is incurred. Collating the necessary information is not straightforward and retrospective claims especially are unlikely to be as successful, if picked up at all, particularly if left to the accountant to address 12 to 18 months after the project’s completion.
The benefit for partnerships and individuals is every £100,000 spent on ECA qualifying assets, provides £45,000 cash back in the form of tax relief in the year that it spends the money (£19,000-20,000 for companies). Veritas Advisory advised on a recent £1m office refurbishment for a firm of lawyers and identified £300,000 of ECAs which represented a £135,000 reduction in the Partners tax return for that year; the increased energy efficiency and potential rental uplift providing further reward.
Claiming ECAs is not an automatic benefit; the key point is that it must be demonstrated by the tax payer that they have the entitlement to make a claim at the time they incurred the expenditure. Veritas Advisory have an ECA process where by working alongside the project team we liaise with the suppliers to assess the ECA status at the time of procurement and if necessary, facilitate the product listing or certification required to make a claim.
If you would be interested in finding out more about how Veritas Advisory could assist in this area, then please contact one of our Directors (https://www.veritasadvisory.co.uk/about-us/).