Environmental guidance for your business in Northern Ireland & Scotland

Enhanced capital allowances

Enhanced capital allowance (ECA)

You can claim an enhanced capital allowance (ECA) of 100 per cent of the cost of certain types of equipment in the year that you buy them. These are also known as first-year allowances.

These designated types of equipment are:

  • water-saving plant and machinery
  • energy-saving plant and machinery
  • low carbon-dioxide emission cars
  • natural gas and hydrogen refuelling infrastructure.

You can write off the whole cost of qualifying equipment against your taxable profits in the period during which you make the investment, thus improving cashflow.

Water efficient equipment

First-year allowances are available for expenditure on plant and machinery that is designed to improve water quality or reduce water use. :Example include:

  • water-efficient showers and taps
  • vehicle-wash water reclaim units.

Plant and machinery that qualifies must be included as a qualifying technology or product specified in a Technology List or a Product List issued by the Secretary of State for the Department for Environment, Food and Rural Affairs.

You can't usually claim this allowance for equipment that you buy for leasing out.

Defra provides more information about what equipment qualifies.

Department for Environment, Food and Rural Affairs (Defra): Search for water efficient technologies

If your business or organisation is liable to Corporation Tax, there are also some special rules that may allow you to surrender losses you make that are attributable to investments in qualifying equipment in return for a cash payment called a first-year tax credit. It is the making of the claim that creates the loss and it is only the loss attributable to the capital allowance claim for these assets that is relevant for the first-year tax credits.

HMRC: First year tax credits

Energy-saving equipment

First-year allowances are also available for expenditure on energy-saving equipment for example:

  • high-efficiency lighting units
  • solar thermal systems.

To qualify for a first year allowance the equipment must be included as a qualifying technology or product specified in a Technology List or a Product List issued by the Secretary of State for the Department of Energy and Climate Change.

You can't usually claim this allowance for equipment that you buy for leasing out.

GOV.UK: The Energy technology products list

HMRC: First year allowances for energy saving products

If your business or organisation is liable to Corporation Tax, there are also some special rules that may allow you to surrender losses you make that are attributable to investments in qualifying equipment in return for a cash payment called a first-year tax credit. It is the making of the claim that creates the loss and it is only the loss attributable to the capital allowance claim for these assets that is relevant for the first-year tax credits.

HMRC: First year tax credits

Low CO2 emission cars

First-year allowances are available for expenditure on a new electric car, or a new, unused car with CO2 emissions of not more than 110gm per km driven, for expenditure incurred before  31 March 2013, or 65 gm per km for vehicles purchased after April 2013.

HMRC: Capital allowances on Plant and Machinery

GOV.UK: Car fuel data, CO2 and vehicle tax tools

If you purchase an ultra-low emission vehicle you can claim a Plug in Grant of 25 per cent of the cost of the vehicle up to a maximum of £5,000. You can find a list of qualifying cars on the GOV.UK website.

GOV.UK: Plug-in car grant 

Zero emission goods vehicles

First-year allowances are available up to 31 March 2015 for expenditure on a new and unused goods vehicle with zero emissions. However, there are certain restrictions. If you are intending to acquire a zero emission goods vehicle, please contact the HMRC Capital Allowances Helpline on Tel 020 7147 2610. This is an answerphone with a call-back service.

Vehicle gas refuelling equipment

Until 31 March 2013, 100 per cent first-year allowances are available for expenditure on new plant and machinery installed to refuel vehicles with:

  • natural gas
  • hydrogen
  • biogas.

Eligible equipment can include:

  • storage tanks
  • compressors
  • controls and meters
  • gas connections
  • filling equipment.

The refuelling station does not need to be open to the public or used for cars. For example, an operator of a fleet of commercial vehicles may install a gas refuelling station on its premises to refuel its vehicles.

HMRC: Natural gas and hydrogen gas refueling equipment

You can't usually claim this allowance for equipment that you buy for leasing out.

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