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Capital Allowances

Posted on: Wednesday, February 05, 2014

Most students when faced with a Case I or Case II Add Back computation often find themselves very short of time and as a result rush through the Capital Allowances section and loose valuable marks.

Here are a few main points to keep in mind when answering exam questions:

  1. Capital Allowances are granted for “chargeable periods” – accounting periods in the case of companies liable to corporation tax.
  2. All capital allowances are granted by reference to events occurring in an accounting period.
  3. The Wear & Tear allowance of plant and machinery in use for the purpose of a trade, profession, vocation or employment at the end of an accounting period is calculated by reference to the cost of the item less grants.
  4. From 4th December 2012 onwards the rate is 12½% straight line basis.

In an exam question if the equipment cost €25,000 in 2009 the wear and tear allowance would be 12½% of €25,000.00 being €3,125.00.  The TWDV is not relevant for determining what the wear and tear allowance would be.  Always look to the cost.

For motor vehicles purchased after 1st July 2008 the scheme is divided into categories.

For cars in categories A, B and C the wear & tear allowance will be 12½% based on a value of €24,000.00.

For cars in categories D and E, the cost of the car for capital allowances purposes will be:
  1. 50% of the retail price of the car where that retail price is less than or equal to €24,000 or
  2. 50% of €24,000 where the retail price is greater than the specified amount.

No Capital Allowances will be allowable for cars in categories F and G.



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