Capital Allowances Ireland

From 10^th February 2023 the Revenue Commissioners are posting out letters to taxpayers who are currently registered for Income Tax but who have not submitted Income Tax Returns for years of assessment up to and including 2021.

The letters state:

“Based on a review of your Income Tax records, you have not filed any self-assessed Income Tax returns for years up to and including 2021.”

Taxpayers should start receiving such letters from 13^th February onwards.

Please be aware that your Tax Agent won’t receive a copy of this notice.

What are you required to do?

In the event that the taxpayer is no longer deemed to be a “chargeable person” and, therefore, is no longer required to file an Income Tax Returns, he/she/they should cancel the Income Tax registration.

The term “chargeable person” applies to an individual who:

1. Is self employed or
2. Is a Director of an Irish company or
3. Has other sources of income in addition to a PAYE salary.

An individual who is in receipt of PAYE income as well as non-PAYE income will not, however, be regarded as a “chargeable person” provided:

1. the total gross income from non-PAYE sources is less than €30,000 and
2. the net assessable income is less than €5,000 and
3. the tax is collected by reducing his/her/their tax credits through the PAYE system.

A chargeable person is obliged to file an annual Income Tax Return through the self-assessment system.

How can you cancel your IT registration?

This can be done online via ROS or by completing a Form TRCN1 which is available on the Revenue website.

What happens if you are considered to be a “Chargeable Person”?

If the taxpayer is considered a “chargeable person” but has not filed Income Tax Returns up to 2021, the letter is deemed to be a Final Reminder to file all outstanding income tax returns.

If the taxpayer does not file the outstanding Income Tax Returns or cancel the registration within 21 days of the letter, Revenue will cease the income tax registration without further notice.

Once the Income Tax registration is ceased, if the taxpayer wishes to re-register for income tax he/she/they will be required to submit an online application via ROS.

Final Points

The Notice states:

“You should note that, where further information comes to Revenue’s attention that you were a chargeable person for any relevant tax year, Revenue reserves the right to reinstate your Income Tax registration.

The non-filing of a required tax return by chargeable persons can result in further contact from Revenue, including a follow-up compliance intervention. Non-filing of a return where required is also an offence for which a person can be prosecuted.”

If you have received a Cancellation of your Income Tax Registration Notice and you require assistance filing outstanding Income Tax Returns, please contact us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

On 5^th August 2022 the Irish Revenue Commissioners issued a new Tax and Duty Manual Part 04-06-03, which provides guidance on the tax deductibility of Digital Services Taxes (DSTs).

For full information, please click: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-04/04-06-03.pdf

The guidance provides that certain Digital Services Taxes (DSTs) incurred wholly and exclusively for the purposes of a trade (taxable under Case I and Case II Schedule D) are deductible in calculating the income of that trade for the purposes of computing Irish corporation tax.

The Revenue’s position is that Digital Services Taxes are a turnover tax.

They are levied on revenues associated with the provision of digital services and advertising and not on the profits.

The guidance provides that, in circumstances where the following DSTs have been incurred wholly and exclusively for the purposes of a trade, the Irish Revenue Commissioners will accept that they are deductible expenses in calculating the income of that trade:

• France’s Digital Services Tax;
• Italy’s Digital Services Tax;
• Turkey’s Digital Services Tax;
• United Kingdom’s Digital Services Tax; and
• India’s Equalisation Levy.

The Guidance material doesn’t distinguish between the two forms of equalisation levy under the Indian regime. At this time there is no clear guidance available however, it would be expected that that since both types of levy are so similar that both should be covered. If this situation applies to you, it is advisable to contact the Irish Revenue Commissioners to seek clarification via MyEnquiries.

This Guidance should be interpreted as an initial list.  According to The Revenue Commissioners “The list of DSTs above may be updated as required.”

For taxation purposes, Capital Allowances are deemed to be amounts a business can deduct from its profits in respect of “qualifying Capital Expenditure” which was incurred on the provision of certain assets (i.e. plant and machinery) used for the purposes of the trade.

As depreciation is not allowable for the purposes of calculating tax, Capital Allowances allow the taxpayer to write off the cost of the asset over a certain period of time.

The 2018 Finance Act introduced the following amendments to Capital Allowances as follows:

Accelerated Capital Allowances for Energy-Efficient Equipment

Section 285A TCA 1997 came into effect on 9^th October 2008 to provide relief to companies purchasing energy efficient equipment for the purposes of their trade.

This Capital Allowance Relief was provided in the form of a deduction which equalled 100% of the value of the equipment in the year of purchase provided certain conditions were met (see Schedule 4A TCA 1997).  In other words, this relief reduces the taxable profits, in year one, by the full amount incurred on the purchase of the equipment.

Finance Act 2017 amended the definition of “relevant period.”  As a result, the qualifying period was extended until 31^st December 2020.

On 14^th February 2018, Revenue issued eBrief No. 22/2018 confirming that the Tax and Duty Manual has been updated to reflect the extension of the relief to 31st December 2020.

Section 17 FA 2018 contains further amendments to the scheme.

It sets out criteria as to which products qualify for accelerated wear and tear allowances.

To qualify for the relief, the equipment must be new.

Section 17 FA 2018 makes reference to the Sustainable Energy Authority of Ireland (SEAI) being allowed to establish and maintain a list of energy-efficient equipment under the scheme.  In summary, in order for energy equipment to qualify for the accelerated capital allowances, it must appear on the SEAI list.  These amendments remove the requirement for government to issue Statutory Instruments, on a regular basis, setting out the criteria for “qualifying assets.”

This section of legislation comes into operation on 1st January 2019.

Energy-efficient equipment that has not been approved but is deemed to be plant and machinery can of the normal wear and tear allowances being 12½% over an eight year period.

Capital allowances on childcare and fitness centre equipment and buildings

Section 12 Finance Act 2017 introduced a new accelerated capital allowances regime for capital expenditure incurred on the purchase of equipment and buildings used for the purposes of providing childcare services or fitness centre facilities to employees.

The section amended the Taxes Consolidation Acts 1997 to include two new sections: s285B TCA 1997 and s843B TCA 1997.

The Relief was subject to a Commencement Order which was never issued.

Section 19 of Finance Act 2018 amends Parts 9 and 36 as well as Schedule 25B of the TCA 1997.

The scheme commences from 1^st January 2019.

Finance Act 2018 amends the definition of “qualifying expenditure” making the relief available to all employers, as opposed to just those carrying on a trade which wholly/mainly involves childcare services or the provision of facilities in a fitness centre.   In other words, the relief will be available to all employers since the restriction that the relief is only available to trades consisting wholly/mainly of the provision of childcare services or fitness facilities has been removed.

Where a person has incurred “qualifying expenditure” on “qualifying plant or machinery” a 100% wear and tear allowance is allowed in the year in which the equipment is first used in the business under Section 285B TCA 1997.

Section 843B TCA 1997 allows employers to claim accelerated industrial buildings allowances of 15% for six years and 10% for the seventh year in relation to capital expenditure incurred on the construction of “qualifying premises” i.e. qualifying expenditure on a building or structure in use for the purpose of providing childcare services or fitness centre facilities to employees of the company.

The facilities must be for the exclusive use of the employees and can be neither accessible nor available for use by the general public.

The relief will not be available to commercial childcare or fitness businesses nor will it be available to investors.

Accelerated Capital Allowances for gas vehicles and refuelling equipment

Section 18 Finance Act 2018 introduced accelerated allowances for gas vehicles and refuelling equipment which provides for an accelerated capital allowances rate of 100% on “qualifying expenditure” incurred between 1^st January 2019 and 31^st December 2021.  This section amends the Tax Consolidation Act of 1997 by inserting Section 285C.

Qualifying expenditure is defined as capital expenditure incurred during the relevant period on the provision of “qualifying refuelling equipment” or “qualifying vehicles” used for the purposes of carrying on a trade.

“Qualifying refuelling equipment” includes the following:

• a storage tank for gaseous fuel
• a compressor, pump, control or meter used for the purposes of refuelling gas vehicles or
• equipment for supplying gaseous fuel to the fuel tank of a gas vehicle.

The equipment in question must be new and installed at a gas refuelling station

“Qualifying vehicle” is defined as a gas vehicle, which is constructed or adapted for:

• the conveyance of goods or burden of any description
• the haulage by road of other vehicles or
• the carriage of passengers.

The vehicles in question must be new and do not include private passenger cars.

This section comes into operation on 1^st January 2019.

Disclaimer This article is for guidance purposes only. Please be aware that it does not constitute professional advice. No liability is accepted by Accounts Advice Centre for any action taken or not taken based on the information contained in this article. Specific, independent professional advice, should always be obtained in line with the full, complete and unambiguous facts of each individual situation before any action is taken or not taken.  Any and all information is subject to change.