ENERGY REDUCTION & CAPITAL INVESTMENT INCENTIVES
THERE ARE MANY FINANCIAL INCENTIVES AVAILABLE FOR CAPITAL
INVESTMENT USED FOR ENERGY REDUCTION
INVESTMENT USED FOR ENERGY REDUCTION
ESOS (ENERGY SAVINGS & COMPLIANCE SCHEME)
LEGISLATION AND COMPLIANCE
The Energy Savings Opportunity Scheme (ESOS) is a mandatory energy assessment and energy saving scheme for organisations in the UK that meet the qualification criteria.
You are directly affected and must take part in ESOS if your organisation qualifies as a large undertaking on the qualification date. The qualification date for the first compliance period is 31 December 2014.
A large undertaking is classed as any UK organisation that meets one or both of these conditions:
▸ A UK undertaking that employs 250 or more people;
▸ A UK undertaking that has an annual turnover in excess of 50 million euro (£38,937,777), and an annual balance sheet total in excess of 43 million euro (£33,486,489). Please note that these figures are for the first qualification period, so refer to the end of December 2014.
You also must take part in ESOS if your own organisation is part of a corporate group which includes another UK undertaking that meets either of these conditions. In this situation it is usually the UK parent company that is responsible for ensuring the whole group complies.
Qualification is based on the status of your organisation on 31 December 2014, and every four years after that for each subsequent compliance period. If your organisation qualifies, you must participate in ESOS and notify compliance to the Environment Agency by the last date of each compliance period.
You need to submit your ESOS notification of compliance to the Environment Agency when you have undertaken an ESOS assessment and are compliant with your obligations.
You must do this by 5 December 2015, and if applicable, every 4 years afterwards.
Your ESOS compliant energy audit must:
▸ be based on 12 months’ verifiable and continuous data
▸ analyse your energy consumption and efficiency
▸ identify areas and periods of significant consumption
▸ identify energy saving opportunities
Organisations that are subject to ESOS, but do not meet the requirements, may be liable to compliance and enforcement activities. This includes penalties for failing to undertake an energy audit which carries a fixed penalty of up to £50,000, with an additional £500 for each working day until the breach is remedied, subject to a maximum of 80 days.
More information and latest guidance can be found on the Government website and the Environment Agency.
ENHANCED CAPITAL ALLOWANCES (ECA)
Enhanced Capital Allowances (ECA), is capital expenditure that qualifies for 100% tax relief no matter if he cost is £1000 or £1Billion and can be offset entirely against your profits to reduce tax or create a tax refund!
ECA offers a huge advantage over the following standard Capital Allowances relief.
HMRC's standard rates of tax relief is 18% (main rate) for plant and machinery and 8% (special rate) for integral features such as non qualifying lighting, building and office fixtures and fittings.
To qualify for ECA, energy reduction equipment must be listed on the Government, ENERGY TECHNOLOGY PRODUCT LIST (ETPL). Only then will installation and adoption of listed energy reduction equipment (eg suitable LED lighting) be subject to the 100% tax relief offered by the Enhanced Capital Allowances scheme.
Energy Oasis provide full guidance on ETPL product eligibility and can advise on claiming for ECA tax relief through your Business Income or Corporation Tax Self-Assessment.
Deduction of a specified percentage of certain investment costs from your tax liability, in addition to the normal allowances for depreciation. Investment credits are similar to investment allowances, which permit businesses to deduct a specified percentage of certain capital costs from their taxable income.
Annual investment allowance: increase to £500,000 for extended temporary period.
Who is likely to be affected?
Businesses investing more than £250,000 in plant or machinery from April 2014.
General description of the measure.
The measure increases the maximum amount of the annual investment allowance (AIA) to £500,000 from 1 April 2014 for corporation tax (CT) and 6 April 2014 for income tax (IT) to 31 December 2015, after which it will return to £25,000.
This measure is designed to stimulate business investment in the economy by providing an increased time-limited incentive for businesses to invest in plant or machinery.
Background to the measure
The maximum amount of the AIA was temporarily increased to £250,000 from £25,000 for the period from 1 January 2013 to 31 December 2014. This measure extends the period of the temporary increase to 31 December 2015 and further increases the amount of the AIA to £500,000 from April 2014.
You can claim capital allowances when you buy assets that you keep to use in your business, such as equipment, machinery and business vehicles. This includes plant and machinery, and parts of a building considered integral, known as ‘integral features’.
Included in the definition of integral features are space and water heating systems, air-conditioning and air cooling systems, hot and cold water systems, and electrical systems, including lighting systems.
The value of the item can be deducted from your profits before tax, up to a maximum annual allowance, known as the annual investment allowance (AIA).
The value of AIA is fixed by Government on an annual basis. The AIA has changed 4 times since 2008 and is due to change again on 1 January 2016.
For the period to December 31st 2015, the allowance is £500,000. From January 1st 2016 the allowance is being reduced significantly, to £25,000.
For more details and the latest official information, please visit the UK Government website, GOV.UK.