Farley And Partners

Capital allowances

‘Capital allowances’ is the term used to describe the deduction we are able to claim on your behalf for expenditure on business equipment, in lieu of depreciation.

For expenditure on business equipment, including vans and fixtures in buildings, but not cars, you may claim a full 100% deduction of up to D500,000 against your profits. If your accounting period is less than 12 months long, or spans the cessation or commencement date, the D500,000 limit is scaled down proportionately. Where you have an accounting period of longer than 12 months, the period must be split and the allowance considered separately for each period. 

If your business is a new economic activity located in an Enterprise Zone your business is entitled to a 100% deduction on all expenditure qualifying as referred to above but with further conditions.

The allowance is available for each enterprise if you run more than one, provided these businesses are not controlled by the same person and either occupy the same premises or carry on the same business activities.

A 100% first year allowance is available for investment in designated energy saving plant and machinery, plant and machinery to reduce water use and improve water quality, and for new unused cars with official emissions limits.

Otherwise, most plant and machinery qualifies for an allowance on a reducing balance basis. There is at a lower rate for long-life assets, fixtures integral to buildings, high emission cars and thermal insulation.

There are no capital allowances available on the purchase or construction of buildings however many items that may seem to be part of a building may actually be regarded as plant or as features integral to a building, and may therefore qualify for a capital allowance deduction.

As capital allowances are based on qualifying expenditure in the accounting year, you might consider buying plant and machinery before the end of the year, rather than just after, in order to obtain an earlier deduction.

If you rent out fully furnished residential property, you may be able to claim a wear and tear allowance to offset the costs of the furnishings you provide. Residential rental businesses cannot claim capital allowances for equipment and furniture in the houses they let.

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