Capital allowances are a form of tax relief for capital expenditure incurred on certain assets. Similar to depreciation, the relief is a write off of the expenditure over a certain period for certain assets in use for the purposes of the trade or rental business.
Why consider Capital Allowances
Capital allowances reduce the income subject to tax. They are the only means of providing tax relief for capital expenditure incurred on both residential and commercial properties.
In our experience of advising clients on property transactions, we are noticing that in up to 70% of cases, capital allowances were either not considered or not fully exploited resulting in a missed opportunity to reduce tax liabilities. Our aim is to rectify that missed opportunity by helping you identify your full entitlement.
Who can claim Capital Allowances?
Certain owner-occupiers, investors, landlords, and lessees who incur capital expenditure on property or plant and machinery.
What expenditure qualifies?
Whether capital expenditure qualifies for capital allowances must be based on the purpose/circumstances for the expenditure and requires consideration of relevant case law and Revenue precedent to support the facts.
Generally, you can claim capital allowances on industrial buildings; farm buildings, plant & machinery; energy efficient equipment; leasehold improvements; and fixtures and fittings.
Qualifying expenditure includes the cost of acquisition; construction; reconstruction; extension; refurbishment; and fit-out.
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How do you benefit from claiming?
Capital allowances can help you by:
- Sheltering a tax liability;
- Generating a tax/cash benefit;
- Improving cash flow;
- Enabling you to claim capital allowances and R&D tax credits on the same expenditure (subject to meeting the R&D tax credit criteria)
How soon do you benefit from claiming?
- For qualifying expenditure on energy efficiency equipment –100% of qualifying expenditure may be allowable as capital allowance in year 1
- For qualifying expenditure on plant and machinery –12.5% of qualifying expenditure may be allowable each year until fully written off – write off over 8 years
- For qualifying expenditure on Industrial buildings – 4% of qualifying expenditure may be allowable each year until fully written off – write off over 25 years
Why choose us?
Nationally we are partner led, and our team of tax consultants, corporate finance advisers and network of quantity surveyors are well placed to give informed, practical and timely advice.
Our experienced Tax Incentives team have successfully prepared, negotiated and settled capital allowances claims for different property projects. Recent examples of which are:
Hospitality property
Purchase price: €47.7 million
Allowances identified by Grant Thornton: €23.7 million
After tax savings:
- Investment company (tax rate 25%) €5.925 million
- Trade company (tax rate 12.5%) €2.963 million
- Held personally (tax rate 52%*) €12.561 million
Manufacturing property
Purchase price: €11 million
Allowances identified by Grant Thornton: €5.6 million
After tax savings:
- Investment company (tax rate 25%) €1.4 million
- Trade company (tax rate 12.5%) €700,000
- Held personally (tax rate 52%*) €2.9 million
Retail property
Purchase price: €3.5 million
Allowances identified by Grant Thornton: €630,000
After tax savings:
- Investment company (tax rate 25%) €158,000
- Trade company (tax rate 12.5%) €79,000
- Held personally (tax rate 52%*) €328,000
Commercial/office property
Purchase price: €185 million
Allowances identified by Grant Thornton: €46.6 million
After tax savings:
- Investment company (tax rate 25%) €11.4 million
- Trade company (tax rate 12.5%) €5.7 million
- Held personally (tax rate 52%*) €24.2 million
Residential property
Purchase price: €400,000
Allowances identified by Grant Thornton: €58,000
After tax savings:
- Investment company (tax rate 25%) €14,500
- Trade company (tax rate 12.5%) €7,300
- Held personally (tax rate 52%*) €30,000
What is our methodology?
- We review the contracts and other documentation to assess whether there is potential to claim.
- We carry out an analysis of the total capital expenditure incurred to identify any missed opportunities, including whether the capital expenditure would also be eligible under the R&D tax credit scheme.
- Where costs are unavailable, we prepare an estimate of the apportionment of expenditure incurred.
- We carry out a site visit.
- We prepare a report to support the claim.
- We assist with audit defence should Revenue enquire into the claim.
Contact us
Schedule a consultation with our Tax Incentives Team to discuss your capital expenditure plans to how we can add value.
