Enhanced capital allowances

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Enhanced capital allowances
  • What is an enhanced capital allowance?
  • How does the scheme operate?
  • What allowances can be claimed?
  • Qualifying activities
  • Qualifying expenditure
  • What is plant and machinery?
  • Types of plant and machinery qualifying for the ECA
  • Low carbon cars
  • Zero carbon goods vehicles
  • More...

Enhanced capital allowances

What is an enhanced capital allowance?

An enhanced capital allowance (ECA) is a tax relief for businesses on their investments in certain categories of plant and machinery, including some forms of technology that are considered to have a positive impact on the environment.

The categories of plant and machinery that qualify for the ‘green’ ECA were significantly reduced from April 2020. Since 1 April 2020 (for corporation tax purposes) or 6 April 2020 (for income tax purposes), expenditure on energy and water-saving technologies has not qualified for the ECA. For more information on why the government made this decision and how many businesses were expected to be affected, see News Analysis: Budget 2018—capital allowances.

The types of energy and water-saving technologies that qualified for the ECA were listed on the government’s energy and water technology lists. The government intends to maintain the energy technology list as a means of disseminating information about the most energy efficient products available, but the products listed no longer qualify for the ECA.

In practice, the usefulness of the ECA is relatively limited (and was even before the exclusion of energy and water-saving technologies) because of the existence of the annual investment allowance (AIA) and, for expenditure incurred by companies between 1 April 2021 and 31 March 2023, of the ‘super-deduction’. The AIA gives 100% relief for all expenditure on plant

Popular documents