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Capital allowances FAQs

Capital allowances FAQs

Frequently asked questions and answers in regards to capital allowances and tax issues.

FAQs in relation to capital allowances 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 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. 

If you built or bought a property or incurred capital expenditure on plant and machinery that is in use for the purpose of trade or rental business, you can probably claim.

Is there a list of qualifying plant and machinery / qualifying expenditure generally?

No, there is no approved list. This is a common misconception.

With regards to qualifying expenditure for Wear and Tear Allowances, there is no legislative definition of the term, “plant and machinery”, so the identification of qualifying items is not straightforward.

How is qualifying plant and machinery (‘P&M’) identified?

Plant and machinery (‘P&M’) must be identified on a first principles basis. Whether an item qualifies must be determined by reference to the facts, the nature of the trade, and the function of the item in the trade. A number of conditions/tests must be satisfied.

Do all fixed assets additions qualify for capital allowances?

No, all capital expenditure does not qualify for capital allowances.

What does entitlement mean?

A taxpayer must satisfy the relevant criteria in the legislation in order to be eligible to make a claim. We will establish that the taxpayer has an entitlement to claim and once this is confirmed, we will prepare a fair and compliant capital allowances claim.

Can landlords claim capital allowances?

Generally yes, where the property is let. It is, however, critical to establish entitlement, especially in a landlord/lessee situation.

Can property developers claim capital allowances?

Yes, when they put the property or P&M in use for the purposes of a trade or rental business.

I bought / built / refurbished a property a number of years ago, but I have not claimed capital allowances (or may have under-claimed). Can I claim the allowances now?

Depending on the facts and circumstances, you may be able to go back four years to amend your tax return to include the allowances that you should have claimed.

I don’t have any information relating to the expenditure incurred. Can I still make a claim?

We can assist by way of generating a breakdown of the expenditure once there is evidence to prove that the expenditure was in fact incurred.

What happens to the allowances that I don’t use?

Depending on facts and circumstances, unused wear and tear allowances and industrial buildings allowances can be carried forward indefinitely and used to shelter future liabilities, i.e. they will not be lost.

Are there any time restrictions for making a claim?

Depending on the specific circumstances of each case, different time limits and restrictions can apply when claiming capital allowances.

Please contact us to discuss your particular circumstances and the appropriate timing for making a claim. We can also determine whether you are in a position to make a look back claim for previous accounting periods. This is offered at no cost or commitment from you.

What are the implications of making an incorrect claim?

  • Under-claiming: You may not have claimed the full amount of allowances / tax savings to which you are entitled 
  • Over-claiming: If your claim is audited by Revenue, you may be leaving yourself open to repayment of the underpaid taxes relating to over-claimed allowances, in addition to interest, penalties and, in extreme cases, publication on the list of tax defaulters.

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