"Claim 100% first-year capital allowance on your LED Lighting"

How does the ECA scheme work?


 

The Enhanced Capital Allowance (ECA) scheme enables businesses to claim 100% first-year capital allowance on investments in LED Lighting, against the taxable profits of the period of investment.



 LED Lighting ECA Scheme



All businesses that incur qualifying spending can claim ECAs. ECAs bring forward the time that capital allowances are available for spending on LED Lighting thereby providing a cash flow advantage.





A higher standard of energy-saving:

Capital allowances enable businesses to write off the capital cost of purchasing LED Lighting against their taxable profits. They take the place of depreciation charged in commercial accounts.

The general rate of capital allowances is 20% a year on a reducing balance basis. For example, if a business spent £1,000 on LED Lighting, it could claim capital allowances of £200 (20% of £1,000) against the taxable profits of the period of investment. Assuming the company pays corporation tax at 28%, the effect of the capital allowance for spending on LED Lighting in the period of investment would be to reduce the business’s tax bill by £56 (£200 @ 28%).

The unrelieved balance of £800 (£1,000 less £200) is carried forward for relief against profits of later years. In this way the spending is written off over a number of years.

If, however, the business invested the same amount in LED Lighting it could claim an 100% first-year capital allowance of £1,000 against the taxable profits of the year of investment. Again assuming the company pays corporation tax at 28% the effect of the first-year allowance would be to reduce the business’s tax bill by £280 (£1,000 @ 28%). Thus, the first-year allowance can confer a cash flow advantage.

The 100% first-year capital allowance relieves all the qualifying spending. Therefore there is no unrelieved spending to carry forward against profits of later years.

Please contact Gemma Lighting LTD on 0844 8565 201 to discuss which products meet the current ECA criteria.