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ECA tax relief scheme for efficient motors and VSDs has ended

21 April, 2020

The Enhanced Capital Allowance (ECA) tax scheme designed to encourage the use of energy-efficient technologies, including high-efficiency motors and VSDs (variable-speed drives), has ended, almost 20 years after it was launched.

The UK's Chancellor of the Exchequer announced the end of the scheme in October 2018, and this has now come into force. The Energy Technology List (ETL) of eligible equipment will continue to be published, but will now function as a source of information for organisations seeking independently-verified energy-efficient equipment.

Although businesses will no longer be able to claim an ECA on new purchases of ETL equipment, the Annual Investment Allowance (AIA) scheme is another form of accelerated tax relief which they can consider when buying new equipment. The AIA was increased temporarily from 1 January 2019 for two years.

The ETL Web site is moving to a new digital platform, with more news and content. There are plans to incorporate the Uniclass product classification system, which is used to categorise and manage information for construction projects. Uniclass codes are used in CAD (computer-aided design) software and in BIM (building information modelling) projects.

At the request of ETL users, the UK’s Department for Business Energy and Industrial Strategy (BEIS) has worked with the NBS construction information platform to map the 140 ETL product categories against the Uniclass codes. BEIS says this will deliver closer integration for users of the ETL, enabling them to choose verified high-efficiency products for use in procurement and design systems.

ECAs allowed businesses to write off the capital cost of purchasing new plant or machinery against their taxable profits. They were originally a key part of the UK Government's programme to manage climate change, incentivising businesses to invest in energy-efficient equipment.

The updated guide explaining the types of motors and drives included in the Energy Technology List removes references to the ECA scheme

As well as VSDs and high-efficiency motors, the ECA scheme covered other technologies including: HVAC (heating, ventilation and air-conditioning) equipment; industrial and commercial refrigeration equipment; compressed air equipment; boiler controls and heat recovery systems; UPSs (uninterruptible power supplies); and high-speed hand dryers.

The ECA scheme was managed by the Carbon Trust. In 2013, it reported that more than 50,000 products had been assessed since the scheme’s inception, with more than 38,000 being listed on the ETL. The scheme had supported an estimated £7bn of sales of high-efficiency industrial equipment, delivering a net economic benefit of more than £4bn. Carbon savings resulting from ECAs over the previous five years had been around 10 million tonnes of CO2. The Trust had also conducted more than 300 market studies into energy-saving technologies that had the potential to be supported by the ECA scheme.

BEIS has published a series of updated guides covering the various ETL technologies, which remove references to the ECA scheme. These include a 13-page document on high-efficiency motors and drives.

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