Wicklow People

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allowances for capital expenditure

If you buy a van for your business or a tractor for your farm you cannot get a 100 per cent deduction from profits for the cost. Instead, a deduction is given at 12.5 per cent per annum.

Thus, if a van costs €8,000 you get an annual deduction of €1,000. In eight years' time you will have got a 100 per cent deduction.

The principle behind the limited annual deduction is because the asset has a useful life over a long period and Tax Law tries to grant a deduction over life.

Investment in buildings has different rates of deduction.

A farm building gets 15 per cent per annum while a factory building only gets four per cent per annum.

A building, not used by a manufacturer, may not attract any deduction at all e.g. a shop or office. Tax Allowances are always net of grants.

Motor cars are more complicated. Cars with a low carbon emission are deemed to cost €24,000 new, those with medium emissions deemed to cost €12,000 new and no allowance is available for cars with high carbon emissions. The annual deduction is limited to 12.5 per cent of the deemed cost.

These limits do not apply to commercial jeeps and vans which are appropriate for the business in which they are used.

Here the annual deduction may still be 12.5 per cent of cost. Taxies get a deduction of 40 per cent per annum.

Probably the best known allowance is called Section 23. Here the construction cost of houses and apartments in certain tax designated locations was allowed to a buyer as a 100 per cent immediate write off against their Irish rental income.

The deduction is still available although many commentators said that it helped cause the crash in property.

Currently, there are new Section 23 eligible houses built prior to 2008 for sale in the Leitrim/Roscommon area.

Attractive allowances giving immediate 100 per cent write off are available for purchase of energy efficient equipment by a business.

To qualify, the equipment must meet strict energy efficient criteria and be supplied by those dealing in approved products. Processes covered include Information Technology, Heating, Electricity, Ventilation and Electric Vehicles.

Intangible assets of a business such as knowhow or trademarks purchased or developed now attract a tax deduction of seven per cent per annum.

Traditionally, deductions were only given for machinery, vehicles and buildings.

In farming there was a scheme which gave an annual write off of 33.3 per cent for investment in pollution control. It has now expired.

It is reported that a new farm allowance scheme is being considered linked to farm safely measures.

Wicklow People