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UPDATE Chancellor scraps ECA tax benefit from Energy Technology List - but expands annual allowance

First-year tax relief scrapped but Energy Technology List continues to grow as regularly updated resource, according to Carbon Trust

The Chancellor of the Exchequer has announced that the first-year tax relief on energy efficient equipment on the Energy Technology List will be scrapped from April 2020. The Energy Technology List has proved controversial in the cooling industry over the years, drawing criticism for the slow speed in which equipment was added and for the long omission of natural refrigeration equipment.

But the Carbon Trust, which manages the list, stresses that the list is is now going from strength to strength as an authoritative source of energy-efficient equipment information for specifiers - and notes that the annual investment allowance has been raised fivefold to £1 million.

The Budget decision to remove the first year Enhanced Capital Allowance for equipment on the list  will give specifiers only a limited time left to benefit, as the ECA scheme will close in April 2020. First year allowance schemes currently allow 100 per cent of the costs of the investment in qualifying equipment to be written off against the taxable income of the period in which the investment is made. There is no cap on the amount that can be claimed for profit-making businesses. Qualifying costs include the installation and transportation costs in addition to the cost of the equipment.

At the same time businesses will stee their annual investment allowance (AIA) raised from £200,000 to £1 million.

Paul Huggins, ETL programme director told RAC that the List would continue to provide authoritative information:

He said: ”Since 2001 the Carbon Trust has supported the UK government in its delivery of the ECA Scheme for Energy Saving Technologies through operating the Energy Technology List (ETL). It is worth noting that the ECA Scheme and the ETL perform different functions. ECAs provide an incentive for businesses to help strengthen the business case for buying energy efficient equipment through providing a tax break. The ETL enables any organisation – including the public sector – to cost-effectively and credibly identify higher performing energy efficient equipment.”

He said the Chancellor’s decision to end the Enhanced Capital Allowance and First Year Tax Credits Scheme for energy saving technologies at the start of April in 2020 would bring to a close 19 years of continuous accelerated capital allowance tax relief for energy efficient technologies used by industry.

”The government currently has no plans to stop supporting the Energy Technology List, and remains committed to its proposal made in the Clean Growth Strategy to ensure incentives for investment in energy efficiency are regularly reviewed. The Chancellor also announced a number of changes to update the ETL Criteria to reflect developments in eligible technologies. Subject to Parliamentary approval, these changes are expected to come into force in 2019. The qualifying criteria for 18 of the existing categories will be revised, and Flow Controllers (a sub-technology of Compressed Air Equipment) will be removed.”

Mr Huggins said: “Although the ETL has been a key element to enable the ECA Scheme, it is also an important and valuable tool in itself that organisations of all sizes regularly use to identify higher performing energy efficient equipment across nearly 60 technology categories, such as heat pumps, EC electric motors, retail display cabinets, packaged chillers and LEDs. As of today there are 15,221 products listed on the ETL and it continues to receive strong support from manufacturers, suppliers and their trade bodies.”

”Because it is an authoritative and regularly updated resource (new products are added every two weeks), many large enterprises and public sector bodies have embedded the ETL into their procurement processes to ensure they are buying energy efficient equipment that results in lower overall total cost of ownership than alternatives that may come at a cheaper capital cost. Equally SMEs, who often lack the internal resources needed to identify energy efficient equipment, often rely on the ETL as a government-backed, independent, and trusted source of energy efficient equipment from which to select their next equipment purchase.”

 

Readers' comments (1)

  • Hi Andrew, Thank you for giving me this opportunity to let the RAC readers know a little more about the recent ECA announcement.

    Since 2001 the Carbon Trust has supported the UK government in its delivery of the ECA Scheme for Energy Saving Technologies through operating the Energy Technology List (ETL).

    It is worth noting that the ECA Scheme and the ETL perform different functions. ECAs provide an incentive for businesses to help strengthen the business case for buying energy efficient equipment through providing a tax break. The ETL enables any organisation – including the public sector – to cost-effectively and credibly identify higher performing energy efficient equipment.

    In the Budget statement of the 29 October 2018, the Chancellor announced that the Enhanced Capital Allowance and First Year Tax Credits Scheme for energy saving technologies will end in about 18 months' time, at the start of April in 2020. This will bring to a close 19 years of continuous accelerated capital allowance tax relief for energy efficient technologies used by industry.

    The government currently has no plans to stop supporting the Energy Technology List, and remains committed to its proposal made in the Clean Growth Strategy to ensure incentives for investment in energy efficiency are regularly reviewed.

    The Chancellor also announced a number of changes to update the ETL Criteria to reflect developments in eligible technologies. Subject to Parliamentary approval, these changes are expected to come into force in 2019. The qualifying criteria for 18 of the existing categories will be revised, and Flow Controllers (a sub-technology of Compressed Air Equipment) will be removed.

    Although the ETL has been a key element to enable the ECA Scheme, it is also an important and valuable tool in itself that organisations of all sizes regularly use to identify higher performing energy efficient equipment across nearly 60 technology categories, such as heat pumps, EC electric motors, retail display cabinets, packaged chillers and LEDs. As of today there are 15,221 products listed on the ETL and it continues to receive strong support from manufacturers, suppliers and their trade bodies.

    Because it is an authoritative and regularly updated resource (new products are added every two weeks), many large enterprises and public sector bodies have embedded the ETL into their procurement processes to ensure they are buying energy efficient equipment that results in lower overall total cost of ownership than alternatives that may come at a cheaper capital cost. Equally SMEs, who often lack the internal resources needed to identify energy efficient equipment, often rely on the ETL as a government-backed, independent, and trusted source of energy efficient equipment from which to select their next equipment purchase.

    Lastly, can I point out to your readers that there has been a 5-fold increase in the Annual Investment Allowance. It has been increased from £200k to £1m per annum.

    Warm regards

    Paul Huggins
    ETL Programme Director

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