Finance Bill Tracking Service 2009 | Budget 2009


Who is likely to be affected?

1. Businesses purchasing designated plant and machinery which is energy efficient, reduces water use or improves water quality.

General description of the measure

2. The Energy Saving and Water Efficient (environmentally beneficial) Enhanced Capital Allowance (ECA) schemes allow businesses investing in designated technologies that reduce energy consumption, save water or improve water quality to write off 100 per cent of the cost against the taxable profits of the period during which the investment was made.

3. This measure amends the lists of technologies covered by the schemes.

Operative date

4. The changes to the schemes will have effect on and after a date to be appointed by Treasury order to be made prior to the Summer 2009 Parliamentary recess.

Current law and proposed revisions

5. Capital expenditure by business on plant and machinery normally qualifies for tax relief by way of capital allowances, normally given at the rate of 20 per cent a year on a reducing balance basis.

6. Two schemes exist that provide 100 per cent first year allowances for expenditure on certain energy-saving and water efficient technologies. The qualifying technologies are published in the Lists: the Energy Technology Criteria List and Water Technology Criteria List. Every year these lists are reviewed by the Department of Energy and Climate Change (DECC) and the Department for Environment, Food and Rural Affairs (Defra) respectively, to ensure that the qualifying technologies, and the criteria that technologies must meet if they are to qualify for the relief, are still relevant.

7. Following this year's review, the energy efficient scheme list will be revised to include one new technology (uninterruptible power supplies) and two new sub-technologies (air to water heat pumps and close control air conditioning systems). Three existing sub-technologies (air source: single duct and packaged double duct heat pumps, ground source: brine to air heat pumps and water source: packaged heat pumps) will be removed. Minor housekeeping changes will also be made to the existing criteria of both schemes.

8. All revisions will be incorporated in new Lists which will be published later in 2009 by DECC and Defra. Once these have been published, a Treasury Order links them to the schemes. The Lists are available on the internet at

Further advice

9. If you have any questions about this change, please contact Nick Williams on 020 7147 2541 (email: Information about Budget measures is available on the HM Revenue & Customs website at