Previously I pointed out the potential savings that can be made and the finance available from The Carbon Trust for replacing current lighting, heating, cooling equipment etc with an energy efficient equivalent. In that article I mentioned that the cash flow savings delivered through reduced payments to your utility supplier can finance the loan repayments. This is not the whole picture. There is still a little more meat to add to the bones on this topic.
HRMC have in recent years attempted to encourage business to invest in green technology/ equipment. This has primarily been delivered through the Capital Allowance scheme.
The ‘incentive’ as provided by HMRC is the availability of Enhanced Capital Allowances to achieve tax relief on the acquisition and installation of certain certified energy saving equipment.
Check the following link to confirm that any potential equipment acquisition qualifies for Enhanced Capital Allowances before you buy http://etl.decc.gov.uk/etl/find/
The application of these Enhanced Capital Allowances effectively allow the business to claim tax relief on the full cost of acquisition and installation of this equipment in year one.
Example – assume the business spends £10,000 on energy efficient equipment and its subsequent installation. The business can then claim a reduction in its taxable profits to the extent of £10,000. This is applicable to either limited company, sole trader, or partnership businesses.
There is a further aspect to the Enhanced Capital Allowances for limited companies that we will look at next time.