Government gives tax relief for energy-saving technology

The scheme is part of a package of measures to help the UK reduce its greenhouse gas emissions and energy needs. Introduced in the Finance Act 2001, a list of technologies that qualify for 100% first-year allowances has now been given statutory force by the Treasury and will take effect from 7 August. Any equipment purchased since 1 April will qualify for the scheme.

This means businesses can offset their entire expenditure on designated equipment against their taxable profits during the year the investment is made, instead of having to write the cost of the investment down over a period of years. The enhanced capital allowances are claimed in the same way as other capital allowances on the Corporation tax return for companies and the Income tax return for individuals and partnerships.

Claims must be based on costs incurred. A purchase that is not part of a larger item of plant is priced at its own cost, and when a large piece of plant incorporates a qualifying item, the proportion of cost that relates to the qualifying item will attract the tax relief. Indirect expenditure does not count.

The Energy Technology product list can be accessed from the scheme’s website, with a total of 1646 entries in all under a variety of searchable equipment types such as variable speed drives; single and multiple speed motors; boilers with various energy-saving devices such as flue gas economisers, heat recovery and oxygen trim controls; pipework insulation; and refrigeration aids such as automatic leak detection, automatic air purgers and evaporative condensers. The Energy Technology criteria list contains the energy saving standards, developed by DEFRA, the Inland Revenue, business and industry, which have to be met by each of the different types of technology.

Not all of the categories yet have qualifying equipment available – a search of the thermal screens category reveals that there is no equipment currently certified under the scheme. Copies of the list of qualifying products can also be obtained from the Environment and Energy Helpline on 0800 585794.