The 2009 draft of a list that details the criteria for each type of technology that qualifies for the Enhanced Capital Allowance scheme, the main UK scheme encouraging businesses to invest in energy-saving equipment, for the first time considers single split and packaged air-to-water heat pumps.
The Enhanced Capital Allowance (ECA) scheme, introduced in 2001, is a key part of the UK Government’s programme to manage climate change, and is designed to encourage businesses to invest in energy-saving equipment. The scheme provides a tax incentive to businesses that invest in equipment meeting published energy-saving criteria, but until recently did not consider the case of air-to-water heat pumps.
Air-to-water heat pumps proposed for inclusion in the ECA scheme
The 2009 draft of a list that details the criteria for each type of technology that qualifies for an ECA (the ‘Energy Technology Criteria List’), single split and packaged air-to-water heat pumps have been proposed for the list for the first time.
Among other proposed criteria, single split and packaged products must be CE marked and meet certain performance criteria, such as a COP in heating mode greater than 4.0 at 100% load and EER in cooling mode greater than 3.1 at 100% load. In addition, all products must be tested in accordance with the testing standard BN EN 14511:2007.
How ECA works in practice
The UK Enhanced Capital Allowance scheme provides 100% first-year capital allowances on investments in equipment meeting published energy-saving criteria against taxable profits of the period of investment. In practice this works as follows: if a business pays corporation tax at the rate of 28%, every £1,000 spent on qualifying equipment would reduce its tax bill in the year of purchase by £280. In contrast, for every £1,000 spent, the generally available capital allowance for spending on plant and machinery in the UK would reduce the business' tax bill in the year of purchase by only £56. In other words, ECA can provide a cash flow boost of £224 for every £1,000 the business spends in the year of purchase.
ECA reflects technological progress
The Energy Technology Criteria List is reviewed annually to ensure that it reflects technological progress. At any time a business can propose a new energy-saving technology class for consideration and possible inclusion on the ECA Scheme through the ECA website.
