1. Why have Enhanced
Capital Allowances been Introduced ?
To offer business an effective means of neutralising
the impact of the Climate Change Levy (a business
tax on the use of energy sources) introduced in
2001 with an incentive to adopt a more environmentally
conscious approach when deploying energy resources.
2.
What financial benefits are derived by claiming
ECA’s?
100% capital
allowances in the first year, including
the costs of installation.
Improved cash
flow.
Taxation reduced
in the first year.
Improved profit
after tax.
3.
Does warm air and radiant space heating qualify
for ECA’s?
Yes, as of August 2002 high efficiency radiant and warm air heating systems
are included as long as they meet the necessary efficiency criteria, and
have been independently verified by an approved body.
4. What is the inclusion threshold
for radiant heating?
Individually flued
(or unflued) systems that achieve a net
thermal efficiency of 86%.
And in addition
have a radiant efficiency of 60%.
Multiburner or continuous
systems that achieve a net thermal efficiency
of 90%.
5. What is the inclusion threshold for warm
air heating?
All units must have a minimum net thermal efficiency of 91%.
6. What impact
will ECAs have on purchasing capital equipment?
Quite simply buying energy efficient systems will now cost less than standard
efficiency options.
Standard Efficiency Equipment
High Efficiency Equipment
Capital cost
(inc installation)
£ 37,250
£ 44,000
Fuel costs
£ 15,900
£ 14,700
Climate Change Levy
£ 1,988
£ 1,838
Less Capital Allowance
£ 2,800
£ 13,200*
TOTAL
£52,338
£47,338
Notes
Fuel costs based on 1600 hrs per annum.
Fuel cost used for illustration 1.2p/kW.
Installation costs from actual data.
Based on Corporation Tax rate of 30%
* 100% capital allowance to be claimed in the first year including the
costs of installation.
7. What AmbiRad
products qualify for ECA? (subject to
final verification by The Carbon Trust)
Vision herringbone combined radiant tube heaters
Vision VSXE UT unitary radiant tube heaters
AR herringbone combined radiant tube heaters
Nor-Ray-Vac continuous radiant system
UDSA warm air unit heaters
UPA high efficiency warm air unit heaters
High efficiency oil fired unit heaters
Centurion high efficiency cabinet heaters
STB and STE gas fired air heaters
8. Where is more information available on CCL
programmes and ECA’s?
Environment and Energy Helpline 0800 585794 www.actionenergy.org.uk
Climate change levy
Introduced in
April 2001, the Climate Change Levy (CCL) is essentially
a business tax on the use of energy sources that
contribute to greenhouse gases and other polluting
emissions.
A business tax on the use of energy sources.
1. Why impose a levy?
Following the recommendations in Lord Marshall's 1998 report on
economic instruments and the business use of energy, the Government
decided that a tax on energy would be an effective way of promoting
reductions in its use.
2. Why restrict the use of energy?
Following the Kyoto Climate Change Conference, the UK Government entered into
a legally binding commitment to reduce the UK's total greenhouse emissions by
12.5% below 1990 levels, by the period 2008 to 2012. A domestic goal of 20% reduction
in Carbon Dioxide emissions by the year 2020 was also set.
The Government has undertaken a commitment to reduce greenhouse
emissions. Only domestic and transport sectors are exempt from the
tax.
3. How much is raised by the Climate Change Levy and how is it
used?
It is estimated that approximately £1.0
billion per annum is raised.
The tax is intended to be fiscally neutral, being recycled back to business by
cutting employers National Insurance contributions (NIC) by 0.3% and funding
energy efficiency initiatives.
All other sectors of the economy are required to pay a levy
4. What is the structure of the levy?
Levy on electricity 0.43 pence per kWh
Levy on natural gas*, coal 0.15 pence per kWh
Levy on LPG 0.07 pence per kWh
*The levy on natural gas does not apply in Northern
Ireland.
Note : Oil, good quality CHP schemes and renewable energy resources are exempt
from the levy
This represents a 20% increase on gas bills based on average fuel prices.
5. What can the AmbiRad Group do to reduce the impact on business costs?
Help you prepare an energy audit and action plan which will identify various
measures for reducing energy use.
Supply energy efficient products that provide 100% capital allowances in the
first year under the Enhanced Capital Allowances scheme.
Clearly, businesses
that are energy intensive and employ few people
will see
a net
increase in energy costs.
