The measure
As has become expected in each Budget since the introduction of the ECA regime in 2001, the list of qualifying technologies has again been updated.
Permanent magnet synchronous electric motors and biomass fired warm air heaters have been added to the list of energy saving technologies qualifying for the 100% first-year allowances, whilst compact heat exchangers and liquid pressure amplification units have been removed. The criteria for eligible taps and showers have been tightened. Minor housekeeping changes are also to be made to the existing criteria for both the energy saving and water efficient schemes.
Who will be affected?
Businesses investing in relevant energy efficient assets.
When?
The changes to the schemes will have effect on or after a date to be appointed by Treasury Order prior to the summer 2010 Parliamentary recess.
Our view
The significant NPV benefit of up to circa 30% in securing ECAs is now more attractive with the withdrawal of the temporary 40% first-year allowance, as generally assets otherwise attracting ECAs would qualify as special rate assets and therefore only receive writing-down allowances at a rate of 10%.
Whilst the addition of the new technologies is welcomed, this is largely confined to a fairly narrow range of businesses and is offset by the impact of the removal of other technologies which will disappoint those investing in refrigeration and cold storage in particular.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
