Capital Allowances

Expenditure incurred on or after 4 December 2002 on plant and machinery, fixtures and fittings etc, may be written off at 12.5% per annum on a straight line basis over an 8 year period (previously 20% per annum over 5 years).

The annual allowance for motor vehicles (other than taxi and short-term hire vehicles) is 12.5% on a straight line basis for expenditure incurred on or after 4 December 2002 (previously 20% per annum on a straight line basis). The maximum qualifying cost of motor vehicles purchased on or after 1 January 2007 is €24,000 (with varying figures applying for prior years). The €24,000 restricted cost applies to both new and secondhand motor vehicles.

A revised scheme for capital allowances and leasing expenses for cars used for business purposes is being introduced from 1st July 2008. The revision will link the availability of such allowances and expenses to the CO2 emission levels of the vehicles. Cars will be categorised by reference to CO2 emissions with the emissions bands being broadly consistent with the new VRT system, as follows:

Category A Vehicles	Category B/C Vehicles	Category D/E Vehicles	Category F/G Vehicles
0 –120g/km	121 – 155 g/km	156 – 190 g/km	191 g/km +

Cars with CO2 emission levels in Category A/B/C above will benefit from capital allowances at the current car value threshold under the existing scheme of €24,000, regardless of the cost of the car. Cars in Category D/E will receive allowances subject to a car cost limit of €12,000 or 50% of the cost of the car, if lower. Cars in Category F/G will not qualify for capital allowances.

Section 46 Finance Act, 2008 (now Section 285A TCA, 1997) introduced a new incentive for the provision of certain energy-efficient equipment for use in a company's trade. The equipment must be approved and listed by the Minister for Communications, Energy and Natural Resources. Accelerated capital allowances of 100% of the capital expenditure incurred can be claimed for the year in which the equipment is provided and used.

Capital allowances in the form of wear and tear allowances will be available where the provisions of Section 284 TCA, 1997 are met as follows:

A person carrying on a trade must incur capital expenditure on the provision of machinery or plant for the purposes of that trade;
The machinery or plant must belong to that person;
The machinery or plant must be in use at the end of the chargeable period for which the allowances are claimed;
While the machinery or plant is used for the purposes of the trade, it must be wholly and exclusively so used.

Because of the possibility that the approved energy-efficient equipment might not be regarded as machinery or plant in its own right for the purposes of wear and tear allowances, any products that have been approved and listed are deemed to be machinery or plant.

Wear and tear allowances for machinery or plant are generally given over an 8-year period at an annual rate of 12½% of the capital expenditure incurred. In the case of approved energy-efficient equipment, this rate is accelerated and the entire allowance can be claimed in the first year in which the equipment is provided and used for the company's trade. Energy-efficient equipment that is machinery or plant but that has not been approved and listed can, of course, avail of the normal wear and tear allowances.

The normal rules regarding balancing allowances/charges in Section 288 TCA, 1997 apply. Where certain 'balancing' events occur, for example, the sale of the equipment or its ceasing to be used for the purposes of the trade, additional wear and tear allowances may be due, or there may be a clawback of the allowances already granted. This will depend on the proceeds or value of the equipment (or deemed proceeds/value) at the time of the event.