Government Incentives

When an installation of a qualifying Unit or VRV system is complete the end user may qualify for ECA. The end User must be a company or partnership paying corporate tax.

The total amount directly attributable to the installation including consultancy charge, transport, equipment and pipework etc and direct minor builders work may be taken into consideration.

This value would normally be reduced to 25% and the sum taken off the company year end taxable total. The residual (75%) value will reduced to 25% next year and so on until the system is fully amortised and written off. The period is up to the accountant. ECA allows 100% of the installation value to be taken off. The residual taxable sum would be taxed at a percentage relative to its size. (The maximum is 32% stepping down to 0% depending on size of pre tax profit)

 

The saving to a company is reflected in cash flow and either investment interest or reduction in interest payments.

Installations for a small wall mounted could vary by as much as £1,000 right up to differences of many £1000s for large VRV systems with similar equipment lists. After the value of the installation is established the overall tax saving depends on profit level, tax percentages, amortisation times and investment / interest rates.

To access the ETL (energy technology list) please click here

Example
Here is an example to illustrate the cash flow benefit of an ECA. A company paying tax at 30% spends £10,000 on an ETL-listed product. It claims £10,000 ECAs against its taxable profits of the period of investment reducing its tax bill by £3,000.

That compares to the £2,500 allowances generally available for spending on equipment, which would have reduced the companies tax bill by £750. And of course that doesn't include the savings you make on your energy use with the new equipment.