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17:05

Leasing Charges

Posted on: Tuesday, April 08, 2014

Whether you're studing for the Accounting Technician qualification or for the A.C.C.A., C.P.A. or A.C.A. exams, leasing charges feature regularly in exam questions.

If you're short of time, reading through the notes and revision material may not be an option at this stage so here are the main points you will need to know to pass your tax exams:

Finance Act 2008 introduced a scheme of relief for leasing charges for business cars which seek to limit the availability of allowances for leasing charges by reference to the carbon emission levels of cars.

In the case of Categories A, B and C (up to 155g/km), the leasing charges will be increased or reduced as the case may be in the proportion which the specified amount (i.e €24,000) bears to the cost of the car.

Accordingly such cars will benefit from a proportionately higher deduction than the actual leasing charges where the cost of the car is less than €24,000.00.

In the case of cars in categories D and E (up to 190g/km), where the cost of the car is less than or equal to the specified amount (i.e. €24,000) the leasing charges will be reduced by 50%. 

Where the cost of the car is greater than €24,000 the leasing charges will be reduced in the proportion which 50% of the specified amount bears to the cost.

Example
If the cost of operating lease expenses were €3,000 and the cost of the car was €35,000.00 then the cost of the car is greater than our specified amount of €24,000.00.

The leasing charge of €3,000 will be reduced in the proportion which 50% of the specified amount bears to the cost i.e. €3,000 x €24,000/€35,000 x 50%

Therefore €3,000 will be reduced by €1,029 to give an add back figure of €1,971.00 in your Corporation Tax Computation.