Lite-house can now help businesses generate enhanced tax relief through the launch of a new range of LEDs which qualify under the government’s ECA Energy Scheme to manage climate change.
- ECA = Enhanced Capital Allowances
Firstly, please note: at the end of each tax year, businesses can claim tax relief on investments in equipment. If the equipment meets published energy saving criteria, the tax relief is enhanced.
- What is the point of the ECA Energy Scheme?
In order to help save the planet, the government is encouraging businesses to invest in equipment which is less harmful to the environment – such as equipment which is energy efficient.
- A real-time order tracking system.
Illuminated Signage is now included in the qualifying criteria of the ECA energy scheme. Businesses can receive enhanced tax relief by investing in signage which contains ECA qualifying LEDs.
- What can be claimed?
The whole sign does not qualify for enhanced tax relief as explained below:
New signage
Enhanced tax relief can be claimed for the ECA qualifying LEDs, power supply and labour time to fit the LEDs into the sign. The remaining parts of the sign including the metal sign tray, acrylic, and labour to install items such as this cannot be claimed.
Retrofits
Enhanced tax relief can be claimed for the cost of the ECA qualifying LED system comprising of the LEDs and power supply. It also includes the cost of installing the new system and any associated costs such as travelling to site or equipment hire for the fit out. The most common example of this is visiting an existing sign with fluorescent tubes and replacing the tubes with an ECA Compliant LED system.
- What does this mean for Lite-house as a trade supplier?
The enhanced tax relief is claimed by the end user, it has no direct financial benefit to Litehouse or (the Sign Company or Sign Maker). These LEDs offer customers a different take on the cheap and cheerful LEDs offered by many competitors.
- How can ECA LEDs be sold to customers?
The qualifying criteria of the scheme states that the LEDs must be highly efficient (delivering at least 46 lumens per watt), and that the LED depreciation is less than 5% over 6,000 hours; guaranteeing a very reliable LED system. Furthermore, these modules are very competitively priced because they are bought in bulk. This coupled with the enhanced tax relief which can be passed onto the end user, should make this choice very appealing. Lastly of course, choosing to go for an LED compliant ECA system will mean the end user is doing their bit to help save the planet and reduce their energy bill into the bargain. Lite-house needs to encourage its customers to communicate these points to their customers and thus assist them to win the contract.
- Advice note to be added to the quote
** ADVICE NOTE – ECA Compliant LEDs from Lite-house**
Prior to order, we would recommend that your customer (the end user making the claim), contacts their local tax office to inform them of the planned purchase of an ECA compliant LED illuminated signage system.
- Typing the quote
When preparing a quote, the ECA compliant elements of the job (please refer back to the above section: What can be claimed?) must be itemised separately from elements of the job which cannot be claimed. So for quoting a set of illuminated letters or light box, insert an Item 1 for the metal letter or light box, including any acrylic faces, back trays or fixings; next add, Item 2 detailing the LEDs and power supply only. This is the only way in which paperwork for claims will be accepted by the tax office; the separation must be copied by Lite-house’s customers when they quote and invoice the end user (although they will naturally add a mark-up). Item 2 of the quote should be detailed as is normally the case for LEDs, however please add the line "ECA Compliant LEDs to suit the above". This separation of the LEDs MUST BE DONE ON THE QUOTE.
- How do the financials work?
If you would like to send a customer an overview of the scheme financials, please email them the text below and explain it has been taken from the Carbon Trust website. If their accountant would like to investigate further, the Carbon Trust Advice Line is: 0800 085 2005 or they can contact their local tax office.
If your business pays corporation tax at 28%, every £1,000 spent on qualifying equipment would reduce its tax bill in the year of purchase by £280. In contrast, for every £1,000 spent, the generally available capital allowance for spending on plant and machinery* would reduce your business' tax bill in the year of purchase by £56. In other words, an ECA can provide a cash flow boost of £224 for every £1,000 spent in the year of purchase**.
* 20% a year on the reducing balance basis.
** ECAs provide 100% tax relief, so there is no further tax relief in later years. The general rate of capital allowances does not provide 100% tax relief so there is a balance of spending to carry forward on the reducing balance basis for relief in later years.