Claiming tax relief on energy-efficient kit

Energy Efficient Kit

Farmers have just two months left in which to take advantage of a government scheme which encourages them to invest in energy efficient equipment. The scheme is scheduled to close on 31 March 2020. 


The Energy Technology List (ETL) covers energy-saving items such as biomass boilers, electric motors and lighting which qualify or full tax relief through the Enhanced Capital Allowance (ECA) tax scheme.


This scheme was set up to encourage investment in energy efficient equipment which is often more expensive to buy than less efficient alternatives. All ETL products have to meet specific energy criteria.


There are about 14,000 items on the ETL, including equipment such as biomass equipment, electric motors, lighting and air conditioning systems.


For a product to qualify for an ECA, it must be on the ETL on the day of purchase. On the ETL website you can search for eligible products by technology type, manufacturer, product name and model number.


Any equipment that has already benefited from other support such as the Renewable Heat Incentive is ineligible for the ECA.


The Carbon Trust manages the ETL for the Department for Business, Energy and Industrial Strategy (BEIS) and updates the list with new products on the 1st and 15th of each month. Products that have been removed from the list since 1 April 2017 will appear on the list with a note of their removal date.


Any business that pays income or corporation tax can write off the entire cost of any eligible equipment against taxable profits in the year of purchase. Allowing costs to be written off in this way means that investments in energy-saving equipment can be made where they might have otherwise been too expensive.


However, with the current Annual Investment Allowance (AIA) being £1m, many farmers and other small and medium-sized businesses have recently found that they do not need to claim ECA to receive the same tax benefits.


Loss-making partnerships or sole traders can still claim ECAs, although doing so increases their losses.  These will be automatically carried forward to set against the first available trading profit or against other income, depending on individual circumstances.


Claiming ECAs does not affect other tax relief. The 100% allowance available for ETL items is separate from the AIA, so a farmer who has already used their full AIA against other equipment can still claim the ECA on qualifying equipment.


For more information, please contact our specialist agricultural team.