Government ETL Tax Break Explained
For Commercial purchases of LED Lighting, there is tax break because the products meet the Energy Technology List (ETL)criteria for lighting, which will helps you to reduce your energy costs even further.
Smithie UK Limited - ETL LED Lighting Statement:
Smithie UK are proud to confirm that ALL our commercial LED lighting products comply with the Energy Technology List (ETL lighting) criteria, a government scheme that sets the performance criteria of highly energy efficient products.
Businesses that purchase products in the ETL’s lighting technology category that are ETL compliant can claim an Enhanced Capital Allowance (ECA) - a first year 100% accelerated capital allowance that delivers all available tax relief in 1 year. This is equivalent to 5.5 times the benefit of standard tax relief in the year of purchase.
Consider embedding the ETL into your procurement processes today to ensure your business buys energy saving products.
Doing this will reduce the time it takes your business to find good quality products, and can deliver resource, energy and financial savings.
ETL - LED Lighting and the Tax Break Explained:
The ETL is the world’s largest energy efficient product database of its kind, having assessed almost 60,000 individual products over the lifetime of the scheme. As a result of substantial overall energy cost increases in recent years, alongside increasingly stringent environmental legislation, there is continuing pressure on all organisations to focus on reducing their energy consumption and emissions in order to remain competitive.
The Energy Technology List (ETL) adheres to the government-approved criteria, to ensure that products that comply are top performing energy saving products and ALL our products comply. Buying energy efficient equipment results in a lower overall spend on energy, improved cash flow and lower overheads. This is a very attractive proposition. For many organisations, energy use is often the second highest cost after staff salaries, and for some energy intensive industries it can be the highest operational cost.
Carbon Trust manages the ETL program on behalf of the UK Government.
The ETL currently covers 57 individual technology subcategories, lighting products are not listed individually on the ETL. This is because there are too many product variations to make the listing process practical. Instead, we, as suppliers, provide a statement that our products meet the criteria – along with supporting technical information.
An ECA is claimed through a business’s income or corporation tax return in the same way as any other capital allowance. HMRC is responsible for the tax-related aspects of the ECA scheme.
If a business spent £10,000 replacing its lighting with conventional luminaires, claimed a standard capital allowance at the 18% rate and paid 19% corporation tax (other rates exist, see HMRC's information on Corporation Tax rates) then the tax relief would be £342 in the first year* Further tax relief could be claimed in subsequent years.
However, if the business invested in higher efficiency LED luminaires that meet the ETL White LED criteria then it could claim an Enhanced Capital Allowance, giving an immediate one-off 100% of the available tax relief of £1,900 that year. In other words, an ECA can provide a cash flow boost of £1,558 for every £10,000 spent in the year of purchase, with no need to claim further relief in future years.
* Assuming all available Annual Investment Allowances (AIA) have been taken and standard capital allowances are being claimed, the standard rate is 18% on a reducing balance scale. A company can claim ECAs in addition to AIAs, thereby increasing total available accelerated tax allowance.
Eligibility for an ECA: special applications and exclusions
- Eligible white LED lighting units consist of one or more white LEDs incorporated into a light fitting (or luminaire) with associated electronic control gear
- Eligible High Efficiency Lighting Units (HELUs) consist of a light fitting (or luminaire), one or more lamps and associated control gear.
- Eligible lighting controls are products that are specifically designed to switch electric lighting on or off, and/or to dim its output
Exclusions: Replacement lamps (retrofit)
ECA cannot be claimed for the cost of re-lamping existing light fittings (e.g. when the lamp/bulb fails) or for incorporation within new light fittings. Where a new lamp is installed in an existing light fitting, the lighting product is said to be made good (i.e. essentially returned back to its prior operational state).
Under these circumstances, for tax purposes, the purchase would be considered as an operational expenditure and not a capital expenditure. No ECA can be claimed on the purchase of re-lamping technologies
Note: Only complete lighting units are eligible because products must be tested as an integrated whole. This means that separate sub-components are not eligible.
To meet the requirements of the ECA scheme complete products must be purchased in one tax year and must be shown to be compliant with the ETL criteria at the time of purchase.
Emergency lighting is not supported by the ECA scheme. However, if the main lighting scheme contains a conversion to emergency lighting, the value of the original luminaire (prior to the conversion) may be claimed.
Illuminated signage is currently unlikely to meet the ETL criteria if the lighting is integrated into the sign, as the sign is then considered to be the 'lighting unit'. However, if a standalone lighting unit, which meets the criteria, is used to illuminate a sign, the lighting unit (not the complete sign) may be eligible for an ECA.
How to Make a Claim
For an ECA claim to be made against a complete lighting unit, Smithie UK will provide a form/letter and product data sheet stating, in summary, that the product(s) being purchased are ETL compliant and eligible for an ECA claim.
For ETL support, please send your requests by email to: firstname.lastname@example.org
Or call us on: 01256 844028