By ending the Enhanced Capital Allowance Scheme and replacing it with the Annual Investment Allowance, the government have reaffirmed their commitment to promoting energy-efficient measures in businesses.
The AIA Scheme allows businesses to claim 100% tax relief on all business purchases that fall within the guidelines on the ETL shortlist.
What Was The ECA Scheme?
The ECA Program offered companies complete tax relief (100%) in the first year for eligible capital expenses. The ETL outlines the energy-efficient technologies covered by the ECA initiative.
This program enabled organisations to deduct the entire cost of their equipment purchases from their taxable income during the purchase year.
The Enhanced Capital Allowance (ECA) program, concluded in 2020, was a significant component of the government's strategy to address climate change. Its purpose was to motivate companies to invest in energy-conserving equipment.
What Is The AIA Scheme? Annual Investment Allowance
The AIA scheme is similar to the ECA, but it's different. Instead of offering 100% tax relief in the first year, the AIA scheme provides a maximum allowance of £1 million for businesses to use against capital expenditure during their accounting period.
The increased allowance means companies can deduct up to £1 million from their taxable income when purchasing new plant and machinery each year. The AIA is available to all businesses, regardless of size or sector, making investing in energy-saving equipment easier.
Is There A Difference Between The Schemes?
Yes. The ECA only applies to specific types of energy-efficient plant and machinery, such as refrigeration equipment, whereas the AIA applies to all new business assets. The AIA scheme also has a much higher threshold than the ECA - with £1 million compared to just £200,000, although this may be subject to review.
How Does The ETL Work With The AIA Scheme?
The Energy Technology List (ETL) still features items of plant and machinery that qualify for total tax relief when purchased in conjunction with the AIA scheme. The list includes commercial refrigeration, extraction and other vital equipment needed to run a commercial food business.
By investing in these products, businesses can ensure their equipment is up to date with the latest energy efficiency standards while maximising savings on tax relief.
Together, the ETL and AIA schemes provide an excellent incentive for companies to invest in energy-efficient equipment, reduce their environmental impact, and introduce cost-saving efficiencies during the cost-of-living crisis and beyond.
How Can The ETL In Conjunction With The AIA Scheme Help Businesses?
Investing in energy-efficient products highlighted on the ETL alongside the AIA scheme can help businesses save money and make your budget go further. With a maximum allowance of £1 million for companies to use against capital expenditure during their accounting period, they can deduct up to this amount from their taxable income when purchasing new approved equipment each year.
Meaning that saving is two-fold; the business budget goes further, and your company does its bit for the planet by investing in energy-saving equipment.
With the ETL and AIA scheme, you can make sound business decisions while doing your bit for the environment. Look at our range of commercial refrigeration products to see how you could benefit from this fantastic opportunity!
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