Government Taxes and Incentives
Climate Change Levy
Since April 2001, an energy tax called the Climate Change Levy was
imposed on all businesses in the UK, exerting financial pressure to
discourage wastage, and use less fuel by maintaining existing systems
at peak efficiency and/or upgrading to more efficient systems, thus
reducing greenhouse gas emissions.
The tax raised approximately £1 billion in the first year and the levy on electricity is now at 0.47p/kWh +Vat.
Enhanced Capital Allowance
In 2001, the government introduced an energy-efficiency incentive
scheme, called the Enhanced Capital Allowance (ECA), as an inducement
for businesses to invest in efficient technologies.
expenditure by businesses on plant and machinery normally qualifies for
tax relief by way of Capital Allowances, given at the rate of 20% per
year, on a reducing balance basis. However, the Enhanced Capital
Allowance scheme permits businesses that invest in certain
technologies, such as these heatpump air-conditioning systems, to write
off 100% of the full cost of the installation (eg design, transport,
craneage, installation and commissioning, etc) against their taxable
profits in a single year; the year when that purchase/investment was
made. Businesses claim the ECA in their Corporation Tax Returns.
government publishes a list of the currently qualifying technologies
and specific equipment in the Energy Technology Criteria List. Every
year the Dept of Energy & Climate Change (DECC) and the Dept for
Environment, Food & Rural Affairs (DEFRA) review the lists to
ensure that the listed equipment continues to qualify. Any equipment
overtaken by later more efficient models are relegated from this list
so that only the most efficient of these equipment remain on these list
of energy saving technologies.
The ECA scheme is managed by the
Carbon Trust. For enquiries contact the Carbon Trust Customer Centre
on 0800 085 2005 or visit the ECA web site at www.eca.gov.uk.
VAT and Domestic Heatpump Systems
Since 2005, the Government has kept the VAT rate for installation of
domestic heatpump air-conditioning systems at the reduced rate of 5%.