How to Claim for ECAs Claims for ECAs are made in the same way as other capital allowances for the Corporation Tax Return for companies and the Income Tax Return for individuals and partnerships.

The Inland Revenue's guidance on the ECA scheme can be found at: -

http://www.hmrc.gov.uk/capital_allowances/investmentschemes.htm

The Inland Revenue administers claims for ECAs and they have wide ranging powers to investigate any aspect of the return. If errors are identified, any tax underpaid may be recovered with interest and in cases of negligent or fraudulent conduct, penalties.

Penalties cannot exceed 100% of the tax that would otherwise have gone unpaid. Claims must be based on the costs incurred. Where you have purchased a qualifying product that is not already incorporated into a larger item of plant and machinery, you must use the price paid for the item as the base of your claim. If you have purchased a qualifying product, which is incorporated into a larger piece of equipment, the eligible claim value is provided in the Claim Values section of this site. The remainder of the equipment can attract capital allowances at the normal (rather than the Enhanced) rates.

The words "on the provision of machinery or plant" in the Capital Allowances Act are interpreted narrowly and exclude remote or indirect expenditure. Some common types of cost are set out below:

Direct transportation and installation costs can be considered as expenditure on the provision of plant or machinery. These for example can include, the costs of transport, crainage costs to lift machinery in to place, project management costs, installation, modifications to existing plant and machinery and commissioning.

Professional fees qualify only if they are directly related to the acquisition and the installation of assets that are plant or machinery. Fees incurred on such things such as feasibility studies or design work are generally too remote from the acquisition and installation to qualify. The eligibility of such costs is a question of fact based on the particular circumstances of the case

Costs of alteration to an existing building arising as a direct result of the installation of qualifying plant and machinery may be eligible for ECA.

Information from www.eca.gov.uk and www.hmrc.gov.uk

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