Revenue Note for Guidance

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Revenue Note for Guidance

273 Acceleration of writing-down allowances in respect of certain expenditure on certain industrial buildings or structures

Summary

This section provides that accelerated rates of writing-down allowances (known as “free depreciation”) may be availed of in certain circumstances in respect of qualifying expenditure incurred on certain industrial buildings or structures. The qualifying expenditure is capital expenditure incurred on the construction (including, by virtue of section 270, refurbishment) of an industrial building or structure which is occupied by the person to whom the writing-down allowance under section 272 is to be made for the purposes of —

  • a trade carried on in a mill, factory or similar premises or of a trade carried on in a laboratory for the analysis of minerals,
  • a dock undertaking, or
  • a trade of hotel-keeping, provided the expenditure is incurred on the construction of premises which are registered with the National Tourism Development Authority (trading as Fáilte Ireland).

Accordingly, therefore, it is to be noted that the benefit of free depreciation under the section is not available to lessors.

Subject to restrictions, the writing-down allowance under section 272 in respect of qualifying expenditure may be increased under this section by an amount specified by the person entitled to the allowance. Effectively, this provides for 100 per cent allowances to be taken by the person entitled to the writing-down allowance under section 272 at his/her discretion. However, for qualifying expenditure incurred on or after 1 April, 1988, writing-down allowances as increased under this section, whether claimed for one or more chargeable periods, cannot exceed —

  • 75 per cent of the expenditure incurred, where the qualifying expenditure was incurred before 1 April, 1989,
  • 50 per cent of the expenditure incurred, where the qualifying expenditure was incurred in the period 1 April, 1989 to 31 March, 1991, and
  • 25 per cent of the expenditure incurred, where the qualifying expenditure was incurred in the period 1 April, 1991 to 31 March, 1992.

Moreover, for qualifying expenditure incurred on or after 1 April, 1992, no acceleration of the writing-down allowances to be made under section 272 is permitted and, for qualifying expenditure incurred before that date, no acceleration of the writing-down allowances to be made under section 272 is permitted for chargeable periods ending on or after 6 April, 1999.

There are 2 categories of exceptions to the restrictions on the availability of accelerated writing-down allowances in respect of qualifying expenditure. Firstly, in the case of —

  • industrial buildings or structures provided for use for the purposes of certain trading operations carried on in the Shannon Airport Area or the Custom House Docks Area,
  • industrial buildings or structures the expenditure on the provision of which was incurred before 31 December, 1995 under a binding contract entered into on or before 27 January, 1988,
  • industrial buildings or structures provided for the purposes of a project approved by an industrial development agency on or before 31 December, 1985 and in respect of the provision of which expenditure was incurred before 31 December, 1995, and
  • industrial buildings or structures provided for the purposes of a project which was approved by an industrial development agency in the period from 1 January, 1986 to 31 December, 1988 and in respect of the provision of which expenditure was incurred before 31 December, 1996,

the writing-down allowance may be increased by whatever amount is specified by the person entitled to that allowance (that is, allowances of up to 100 per cent of the qualifying expenditure may be taken).

Secondly, in the case of —

  • industrial buildings or structures provided for the purposes of a project approved for grant assistance by an industrial development agency in the period from 1 January, 1989 to 31 December, 1990 and in respect of the provision of which expenditure is incurred before 31 December, 1997 (or before 30 June, 1998 where a legal dispute gave rise to a delay),
  • industrial buildings or structures provided for the purposes of such a project which was also approved for “section 130” loan financing and in respect of the provision of which expenditure is incurred before 31 December, 2002, and
  • industrial buildings or structures provided for use for the purposes of a trade of hotel-keeping and in respect of the provision of which expenditure was incurred before 31 December, 1995, where a binding contract for the provision of the building or structure was entered into before 31 December, 1990 and where the hotel is registered with the National Tourism Development Authority (trading as Fáilte Ireland) within 6 months of its completion,

the writing-down allowance may be increased up to 50 per cent of the qualifying expenditure incurred.

Details

Definitions

(1)industrial development agency” is the Industrial Development Authority, Shannon Free Airport Development Company Limited or Údarás na Gaeltachta.

qualifying expenditure” is capital expenditure incurred on or after 2 February, 1978 by the person entitled to a writing-down allowance under section 272 in respect of a building or structure to be occupied by such person for one of the purposes described in paragraph (a), (b) or (d) of section 268(1), namely, for the purposes of a trade carried on in a mill, factory or similar premises or in a laboratory for the analysis of minerals, or of a dock undertaking or of a trade of hotel-keeping. However, capital expenditure incurred on buildings or structures used for hotel-keeping will not be qualifying expenditure unless the premises is registered with the National Tourism Development Authority (trading as Fáilte Ireland).

The effect of the definition of “qualifying expenditure” is to confine the availability of accelerated writing-down allowances to the person who incurs capital expenditure on a building or structure to be occupied by such person for the purposes of a trade to be carried on by such person. Accordingly, the section does not apply to lessors.

Rates of free depreciation – general

(2)(a) Subject to restrictions, a person who is entitled to a writing-down allowance under section 272 for any chargeable period in respect of qualifying expenditure may require that the allowance be increased by such amount as the person may specify. Effectively, this provides for 100 per cent allowances to be taken by the person entitled to the writing-down allowance under section 272 at his/her discretion. Thus, the person could take the full 100 per cent allowance in the first year for which entitlement to the writing-down allowance exists. Alternatively, the person could take the allowances in whatever tranches that person wishes, for example, 20 per cent in year 1, 30 per cent in year 2, 50 per cent in year 3, subject to at least the basic writing-down allowance being taken for any one year.

(2)(b) For qualifying expenditure incurred on or after 1 April, 1988, writing-down allowances as increased under this section, whether claimed for one or more chargeable periods, cannot exceed —

  • 75 per cent of the expenditure incurred, where the qualifying expenditure was incurred before 1 April, 1989,
  • 50 per cent of the expenditure incurred, where the qualifying expenditure was incurred in the period 1 April, 1989 to 31 March, 1991, and
  • 25 per cent of the expenditure incurred, where the qualifying expenditure was incurred in the period 1 April, 1991 to 31 March, 1992.

(3) Moreover, for qualifying expenditure incurred on or after 1 April, 1992, no acceleration of the writing-down allowances is permitted and, for qualifying expenditure incurred before that date, no acceleration of the writing-down allowances is permitted for chargeable periods ending on or after 6 April, 1999.

Continued entitlement to 100 per cent free depreciation for certain buildings or structures

(4) The restrictions (subsection (2)(b)) and prohibition (subsection (3)) on the acceleration of writing-down allowances do not apply in the case of certain buildings or structures.

(5) The buildings and structures concerned are —

  • industrial buildings or structures provided before 23 April, 1996 for use for the purposes of relevant trading operations carried on by companies in the Shannon Airport Area (section 445) or the Custom House Docks Area (section 446); but, in the case of capital expenditure incurred on or after 6 May, 1993, excluding any building or structure provided by a lessor to a lessee other than where the letting is part of those relevant trading operations,
  • industrial buildings or structures provided by a company on or after 23 April, 1996 for use for the purposes of such relevant trading operations carried on by the company, but, in the case of capital expenditure incurred on or after 6 May, 1993, excluding any building or structure provided by a lessor to a lessee other than where the letting is part of those relevant trading operations,
  • industrial buildings or structures the expenditure on the provision of which was incurred before 31 December, 1995 under a binding contract entered into on or before 27 January, 1988,
  • industrial buildings or structures provided for the purposes of a project approved by an industrial development agency on or before 31 December, 1985 and in respect of the provision of which expenditure was incurred before 31 December, 1995, and
  • industrial buildings or structures provided for the purposes of a project which was approved by an industrial development agency in the period from 1 January, 1986 to 31 December, 1988 and in respect of the provision of which expenditure was incurred before 31 December, 1996.

The writing-down allowance in respect of qualifying expenditure on such buildings or structures may continue to be increased by whatever amount is specified by the person entitled to that allowance (that is, free depreciation of up to 100 per cent of the qualifying expenditure may be taken).

Continued entitlement to 50 per cent free depreciation for certain buildings or structures

(6) The prohibition (subsection (3)) on the acceleration of writing-down allowances does not apply, and the restrictions (subsection (2)(b)) on such acceleration are modified, in the case of certain industrial buildings or structures.

(7) The buildings and structures concerned are —

  • industrial buildings or structures provided for the purposes of a project approved for grant assistance by an industrial development agency in the period from 1 January, 1989 to 31 December, 1990 and in respect of the provision of which expenditure is incurred before 31 December, 1997 (or before 30 June, 1998 where a legal dispute gave rise to a delay),
  • industrial buildings or structures provided for the purposes of such a project which was also approved for “section 130” loan financing and in respect of the provision of which expenditure is incurred before 31 December, 2002, and
  • industrial buildings or structures provided for use for the purposes of a trade of hotel-keeping and in respect of the provision of which expenditure was incurred before 31 December, 1995, where a binding contract for the provision of the building or structure was entered into before 31 December, 1990 and where the hotel is registered with the National Tourism Development Authority (trading as Fáilte Ireland) within 6 months of its completion.

The writing-down allowance in respect of qualifying expenditure on such buildings or structures may continue to be increased by whatever amount is specified by the person entitled to that allowance up to 50 per cent of the qualifying expenditure incurred (that is, free depreciation of up to 50 per cent of the qualifying expenditure may be taken).

Restriction on availability of initial allowance where free depreciation claimed

(8) Where a writing-down allowance in respect of qualifying expenditure is accelerated for any chargeable period, no industrial buildings (initial) allowance is to be made in respect of that expenditure for the same or any subsequent chargeable period.

Relevant Date: Finance Act 2018