The former Chancellor of the Exchequer, Gordon Brown, in his March 2001 Budget Report, announced support for business investment in environmentally friendly technologies under the Green Technology Challenge. This allowed for the introduction of a 100% first year Enhanced Capital Allowance scheme on water saving and water quality improving technologies.
The ECA scheme follows a number of representations from business proposing that the Government should introduce tax incentives to encourage firms to invest in environmentally beneficial products. In designing the scheme for enhanced capital allowances, the Government drew on the model operating in the Netherlands.
In July 2001 the Government issued a Consultation Document, 'Green Technology Challenge.' Following analysis of the response to the Consultation the Chancellor proposed that the ECA scheme would support technologies and products which meet relevant water efficiency and water quality improvement criteria.
The Water Technology List was published in July 2003 and is in two parts, the Water Technology Criteria List and the Water Technology Product List. The Criteria List consists of technologies and their eligibility criteria. The Product List was published in Autumn 2003. It listed the eligible products and, in some cases, claim values to be used when the product is incorporated in a larger piece of equipment. A Treasury Order, laid in summer 2003, gave statutory force to the Water Technology List.
The Water Technology Criteria List is reviewed on an cyclic annual basis, and where applicable will include the introduction of new technologies subject to satisfactory methods of performance, certification and ease of identification, cost-effectiveness and controls on Exchequer cost.
Applications for new technology categories for inclusion are accepted all year round, but their acceptance and inclusion are subject to the UK Government's budgetary timetable.
The Key Features of the Scheme
- All businesses are able to claim enhanced capital allowances, regardless of size, industrial or commercial sector or location
- Enhanced capital allowances permit the full cost of the investment in specified technologies to be relieved for tax purposes against taxable income of the period of the investment.
- The qualifying technologies will have to meet defined water saving criteria. They will be published in a List, and the criteria will be reviewed on a cyclic annual basis;
- There are no territorial restrictions on manufacturers wishing to place their products on the list or the source of products.
- Only investments in new and unused plant and machinery can qualify.
For more information on the Enhanced Capital Allowances scheme, see https://www.gov.uk/capital-allowances/overview