Capital allowances explained

Capital allowances explained

What are capital allowances?

What are capital allowances?

What are capital allowances?

Capital allowances are akin to a tax deductible expense. They are available in respect of qualifying capital expenditure incurred on the provision of certain assets that are in use for the purposes of a trade or rental business. They effectively allow a taxpayer to write off the cost of an asset over a period of time.

The area of capital allowances is complex; there is no approved list of qualifying items of expenditure for capital allowances purposes. Entitlement must be established and qualifying expenditure must be properly identified by reference to the facts. Taxpayers must also satisfy a number of conditions established primarily through case law and Revenue precedence.

 

Examples of capital allowances claims

  • Wear and tear allowances claims for qualifying plant and machinery (“P&M”) – typically claimed at 12.5% over 8 years. 
  • P&M analysis for R&D tax credit claims 
  • Industrial buildings allowances claims – typically claimed at 4% over 25 years. 
  • Energy efficient capital allowances claims – 100% claim in year 1. 
  • Look-back claims (review of previous claims made). 
  • Negotiating and settling claims with Revenue. 
  • Repair expenditure claims.

 

Who can claim?

Generally speaking, owner-occupiers, investors, landlords and lessees can claim where they’ve incurred capital expenditure for the purposes of a trade or rental business on any of the following:

  • The purchase of property – new or second-hand 
  • Construction of a new building 
  • Owner-occupier fit-out / refurbishment projects 
  • Landlord or lessee fit-out / refurbishment projects 
  • Ongoing fixed asset addition claims.

 

Examples of claims / property types

  • The purchase of new or second-hand properties. 
  • The fit-out, repair, refurbishment, and extensions of properties, including:
    • Offices
    • Sports centres
    • Retail and shopping centres
    • Distribution warehouse units
    • Primary care centres
    • Hospitals
    • Factory and manufacturing plants
    • Hotels
    • Leasehold improvements
    • Banks
    • Data centres
    • Landlord works
    • Mixed use developments
    • Tenant works
    • Restaurants
    • Rental properties – apartments and houses
    • Nursing homes

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Capital Allowances

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