Which of the following statements about Enhanced Capital Allowances (ECAs) is true?

Enhanced Capital Allowances (ECAs) are a specific type of capital allowance that allows businesses to claim 100% of the cost of certain energy-saving equipment against their taxable profits in the year of purchase. This initiative is aimed at encouraging businesses to invest in environmentally friendly technologies and practices.

The correct statement is that ECAs are only available on new qualifying plant and machinery. This means that businesses can benefit from significant tax relief when they invest in new equipment designed to promote energy efficiency. This limitation ensures that the scheme targets investments that meaningfully contribute to energy savings and environmental goals.

The other statements are not reflective of the current rules surrounding ECAs. For example, the availability of ECAs is tied specifically to new equipment, ruling out the possibility of claims on used equipment. This focus on new equipment ensures that the tax incentives are directed towards the adoption of the latest, most efficient technologies. Additionally, ECAs are not restricted to large corporations; small and medium enterprises (SMEs) can also benefit. Finally, ECAs do not apply to raw materials, as they are designated for capital allowances on equipment intended for energy efficiency improvements.