Capital allowances are a form of Irish tax relief available to businesses for specific capital expenditure. They provide savings by reducing the tax otherwise payable by businesses, where they have spent money on certain capital assets.
They are available where qualifying assets are used in the course of a trade or profession and can also be claimed by investors on rental property.
The main types of capital allowances in Ireland for tangible assets are outlined below and further information can be found on Revenue's website
Wear and tear allowances are available for expenditure on plant and machinery only. This relief can be claimed at 12.5% per annum over an eight-year period.
This is the most common form of capital allowance. It is often easy to tell what qualifies as a machine, but it can be very difficult to tell what qualifies as plant. This is because there is no definition of plant, but throughout over 100 years of case law certain items have been found to qualify in certain circumstances.
Industrial building allowances are available for expenditure on qualifying buildings and structures that typically must undertake some form of processing or manufacturing trade once complete. Unlike plant and machinery, almost the entire cost of construction, conversion or refurbishment could qualify. Land costs do not qualify.
Accelerated capital allowances allow relief to be claimed over shorter period of time. In certain cases they can be claimed where the expenditure would not otherwise qualify for any tax relief. Accelerated capital allowances are available under the headings below.
Accelerated capital allowances for energy efficient equipment are claimed at 100% in the relevant year. Qualifying equipment can be found on the Triple E Products Register, but note that leased equipment doesn’t qualify.
Accelerated capital allowances are available for expenditure incurred on the construction of facilities used by employers to provide employees with childcare or fitness facilities. This scheme has two rates of relief:
Accelerated capital allowances are available at 100% in the first year for expenditure on qualifying electric vehicles and equipment used to convert alternative energy vehicles. To qualify, the vehicles and equipment must be listed in the Triple E Products Register.
Electric vehicles include battery electric vehicles; hybrid electric vehicles; plug-in hybrid electric vehicles. Alternative energy vehicle conversions are equipment used to convert existing commercial diesel vehicles to alternative energy vehicles.
Until 31 December 2024, accelerated capital allowances are claimed at 100% of the cost of new gas vehicles and refuelling equipment that are used for business purposes.
Qualifying vehicles must be road vehicles that run on compressed natural gas, liquefied natural gas or biogas and ordinary passenger cars are excluded.
Refuelling equipment includes new storage tanks, compressors, pumps, controls or meters used for refuelling or for supplying fuel to the tanks of gas vehicles. The equipment must be installed at a gas refuelling station.
This tax relief applies to property where repair works are undertaken as part of building works. It may be possible to get a full tax deduction for repairs undertaken to buildings, subject to a number of conditions. The repairs can be treated as a tax-deductible expense, allowing 100% of the cost can be claimed in the relevant period.
An extensive bank of case law precedents must be referred to determine whether entitlement exists and whether specific expenditure qualifies.
Wear and tear allowances can be claimed for new and second hand motor vehicles at 12.5% per annum over eight years, subject to an emissions threshold and a maximum qualifying cost of €24,000, as shown in the table below.
| Category | CO2 Emissions (g/Km) | Allowable Expenditure |
| A,B,C | 0-155 | €24,000 |
| D,E | 156-190 | 50% of €24,000, or, if lower 50% of actual cost |
| F,G | 191+ | Nil |
Capital allowances can be claimed for some of the cost of developing, extending, refurbishing or fitting out buildings. The building must be used as a rental property or in the course of a trade but the entire cost will not qualify. Subject to entitlement, it is possible for specialists like CA Partners to analyse building expenditure to identify costs that may qualify for capital allowances. Qualifying costs can be plant and machinery attached to property, repair works or structural costs where the building qualifies for industrial building allowances.
Where a second hand rental or business property is purchased, it is possible to claim capital allowances for some of the acquisition cost. This is because the purchaser is partly acquiring second hand plant and machinery that is attached to the property. Where entitlement exists, Irish legislation allows the purchase costs to be apportioned to land, building structure, and plant and machinery, with only the latter qualifying for capital allowances. Specialist knowledge and a detailed analysis is required to determine the apportionment, and Revenue require a professional valuation to be undertaken to determine the qualifying amounts.
Although the entire cost of acquiring or constructing a rental property will not qualify for capital allowances, subject to entitlement, it is possible that a considerable proportion of this expenditure may qualify as plant and machinery. Capital allowances for rental properties can be used to reduce the tax liability arising from the claimant's rental income, providing valuable tax relief for rental property.
