UK Climate Change Levy & Enhanced Capital Allowances

Climate Change Levy
The Climate Change Levy, introduced in the UK from April 2001, adds typically 8% to 15% to the energy bills of businesses. The Levy does not apply for householders or charities, and for heavier industrial users the levy can be partially offset by rebates. As a linked tax measure, employers benefit from a reduction in National Insurance payments.

Enhanced Capital Allowances (the plus side of the Climate Change Levy)
The Enhanced Capital Allowances (ECA) scheme allows businesses to claim 100% first year capital allowances on investments in qualifying energy-saving equipment. The effective saving is calculated to be worth about 5% of the capital cost. The list of products qualifying for ECAs includes boilers, lighting, pipe insulation, motors, variable speed drives, refrigeration, thermal screens and combined heat and power systems. Many of the products are standard in buildings, so their cost in all building projects needs to be separated out so that the employer can claim the allowance against tax. The ‘eligible’ products are on the UK Energy Technology List, on the UK Government’s ECA web site - http://www.eca.gov.uk .

This list is dynamic, with new technologies being added to the list as they are proven and others being withdrawn once they become ‘standard’ practice .
Certain renewable and energy efficient energy supplies are exempt from the Levy. Fuel Oil is already taxed and receives no further tax under the Climate Change Levy.

S J Kinsella 2001


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