The Chancellor of the Exchequer, Gordon Brown, in his November 1999 Pre-Budget Report, announced support for business investment in low carbon technologies under the climate change levy package. This allowed for the introduction of a 100% first year Enhanced Capital Allowance scheme, and a £50m fund for energy efficiency and renewable's.

The ECA scheme follows a number of representations from business proposing that the Government should introduce tax incentives to encourage firms to make energy saving investments. In designing the scheme for enhanced capital allowances, the Government drew on the model operating in the Netherlands.

In December 1999 the Government issued a Consultation Document, 'Energy Efficiency Measures under the Climate Change Levy.' Following analysis of the response to the Consultation the Chancellor proposed that the ECA scheme would support technologies and products which meet the relevant energy efficiency criteria. These include; Combined Heat and Power (CHP), Boilers; Motors - single speed motors, multiple speed motors, integrated motor/drive units, variable speed drives, switched reluctance drives; Lighting; Refrigeration - evaporative condensers, liquid pressure amplification, automatic air purges, controls, curtains, blinds and transparent covers, automatic leak detection; Pipe insulation materials and Thermal Screens.

The Energy Technology List is divided into 2 parts:

• The Energy Technology Criteria List which contains details of the energy-saving criteria that must be met for each of the technology classes;
• The Energy Technology Product List which contains a list of products that have been certified as meeting those standards.

The Energy Technology List was published on the 26 March 2001 and comprises the qualifying technologies and their energy-saving eligibility criteria. The Energy Technology Product List details the eligible products that meet the published energy-saving criteria and, in some cases, claim values to be used when the qualifying product is incorporated in a larger piece of equipment.

The Energy Technology Product List is updated at the beginning of each month on this website. The publication of the Energy Technology Product List launched the scheme in earnest. A Treasury Order laid on the 16 July 2001 gave statutory effect to the Energy Technology Criteria List. Hence claims to 100% first year capital allowances could be made from that date.

Under the scheme, expenditure on technologies and products on the list can qualify for 100% first year allowances if it is incurred:

• by a business in the charge to corporation tax - it is incurred on or after 1 April 2001,
• by a business in the charge to income tax - it is incurred on or after 1 April 2001 and the period of account to which the expenditure relates ends on or after 6 April 2001.

Budget 2002 announced that the Government would, subject to EU state aids approval, introduce ECA's for investments in five more groups of technologies: Heat pumps for space heating, Radiant and warm air heaters, Solar thermal systems, Energy efficient refrigeration equipment - display cabinets and compressors; Specific compressed air system equipment. The Government also extended the ECA scheme to include expenditure incurred from 17 April 2002 on energy saving technologies for leasing to qualify for 100% allowances. The new Energy Technology List was published on 15 July 2002 and the Treasury Order to give statutory effect to the new list came into effect on 5 August 2002. Spending on the new technologies can qualify from that date.

Budget 2003 announced additional qualifying technologies and amended some energy-saving qualifying criteria for ECA investment. On receipt of EU state aid approval one new technology and 7 new sub-technologies were added to the Energy Technology List, they are: Automatic monitoring and targeting equipment; Boilers - biomass boilers (>300kw and <15,000kW); Compressed Air – refrigerant dryer controllers, ultrasonic leak detectors; Refrigeration – air blast pre-coolers, catering storage cabinets, cellar cooling, packaged chillers. Criteria were amended in the following existing technology groups: lighting; Advanced boiler controls and additional energy saving add-ons; Compressed-air – electronic drain traps;Refrigeration display cabinets; Boilers – blow down systems; Warm air and radiant heating; Heat Pumps. The new Energy Technology List was published on the 15 July 2003 and the Treasury Order to give statutory effect to the new list came into effect on 5 August 2003. Spending on the new technologies can qualify from that date.

Budget 2004 announced further additional qualifying technologies and amended some energy-saving qualifying criteria for ECA investment. On receipt of EU state aid approval a further three technologies and four sub-technologies were added to the Energy Technology List, namely: Air-to-Air Energy Recovery; Compact Heat Exchangers; HVAC Zone Controls; Refrigeration - Air-Cooled Condensing Units; Boilers - Condensing Water Heaters; Heat Pumps - Gas Engine Driven Heat Pumps; Heat Pumps - Ground Source Heat Pumps. Criteria were amended in the following existing technology groups: Heat Pumps; Packaged Warm Air and Radiant Heaters - Packaged Warm Air Heaters; Packaged Warm Air and Radiant Heaters - Overhead Radiant Heaters; Refrigeration - Commercial Service Cabinets; Refrigeration - Compressors; Refrigeration - Packaged Chillers; Refrigeration - Refrigerated Display Cabinets; Boilers - Burners with Controls.

The new Energy Technology List was published on the 16 July 2004 and the Treasury Order to give statutory effect to the new list came into effect on 26 August 2004. Spending on the new technologies can qualify from that date.

The Energy Technology Criteria List will be updated annually, and can include the introduction of new technologies subject to satisfactory methods of performance certification and ease of identification, cost-effectiveness and controls on Exchequer cost. The proposals for new technologies must also fit in with the Budget timetable, which means that proposals must reach the Carbon Trust in the summer preceding the Budget. It is recommended that industry should engage in discussions with the Carbon Trust at the earliest opportunity.

Please see the online Technology Proposal section of the website for information on proposing a new technology.

The Key Features of the Scheme

• All businesses in the charge to UK tax can claim enhanced capital allowances, on their qualifying expenditure, regardless of size, industrial or commercial sector or location
• Enhanced capital allowances permit the full cost of the investment in specified technologies to be relieved for tax purposes against taxable profits of the period of the investment.
• The qualifying technologies have to meet the published energy saving criteria. They are published in the Energy Technology Criteria List, where the criteria will be reviewed on an annual basis;
  there are no territorial restrictions on manufacturers wishing to place their products on the list or the source of products.
• Only investments in new and unused plant and machinery can qualify for ECA's.

For the Inland Revenue guidance on the scheme for Enhanced 100% Capital Allowances and Energy Saving Investment please see http://www.inlandrevenue.gov.uk/capital_allowances/eca_guidance.htm

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