Energy Efficient Finance
The government is very keen to promote energy saving throughout the country and offer several incentive schemes to encourage business’s to take up energy saving strategies and technologies. In the solar PV market the government offer its feed in tariff (FIT) to assist purchases with their energy reduction schemes, in the boiler and heating market the government offers the renewable heat incentive scheme (RHI) and in the lighting market they offer the enhanced capital allowance (ECA)
The enhanced capital allowance (ECA) allows business’s to claim back the tax element of their qualifying energy reduction investment within the 1st year of purchase. This means that should a business’s spend £5000.00 on a LED Lighting upgrade the corporation tax element of this cost (21% for the majority of businesses) would be £1,050.00. The purchaser would pay the lighting supplier the full £5000.00 for the upgrade and then simply deduct the £1,050 from the total corporation tax liability figure for the same year as the installation. So over the first year the real cost of the lighting project would be £5000.00 – £1,050.00 = £3,950.00
If we where to divide the £3,950 over 12 months it would equate to a £329.16 per month additional capital outlay the purchaser would have to budget for. But if the lighting project was to save more than £329.16 per month in electricity cost savings then the purchaser would not have to allow any additional funds within their capital expenditure budget.