285A Acceleration of wear and tear allowances for certain energy-efficient equipment

Summary

This section provides for accelerated capital allowances in respect of expenditure incurred by persons¹ on certain energy-efficient equipment bought for their businesses. An accelerated wear and tear allowance of 100% of the capital expenditure incurred can be claimed in the year in which the equipment is first provided and used. The incentive runs until 31 December 2023. It applies to certain new equipment in ten designated classes of technology. These classes of technology are listed in the Table in Schedule 4A. Finance Act 2018 introduced some amendments to the scheme. A framework for the criteria that products must meet/comply with to be eligible under the scheme is now provided for in the section. This allows the SEAI to publish the list of products eligible under the scheme on their website and amend the list as appropriate, based on the criteria. Previously the products included on the list were published and regularly revised following Orders made by the Minister for the Environment, Climate and Communications.

Details

Definitions

(1) “energy-efficiency criteria” has the meaning given to it by subsection (4). The criteria is defined in relation to the minimum levels of efficiency, performance, speed, storage or efficacy to be met and the specific certifications and standards to be complied with or tested, or both, as the case may be, for each class of technology specified in column (1) of the Table.

“energy-efficient equipment” is defined as equipment that complies with the energy-efficient criteria and which is named on the specified list. It must also be new and provided for the purposes of a trade.

“fossil fuel” is defined as coal, oil, natural gas, peat or any derivative thereof intended for use in the production of energy by combustion.

“relevant period” means the period commencing on the date on which the TCA 1997 (Accelerated Capital Allowances for Energy Efficient Equipment) Order 2008 (S.I. 399 of 2008) was made and ending on 31 December 2023.

“specified list” is the list of equipment eligible under the scheme that will be established, maintained, published and amended by Sustainable Energy Ireland – The Sustainable Energy Authority of Ireland (SEAI).

“Table” is the table in Schedule 4A, which sets out the 10 classes of technology, a description of each and the minimum amount of money that must be spent in each class to qualify for the increased allowances.

Wear and tear allowances

(2) Subject to the rules in this section, when a “wear and tear” allowance is made under section 284 to a person in respect of capital expenditure incurred on energy-efficient equipment (as defined), the rate of allowance will be 100%. [Section 284 is the basic wear and tear allowances section for plant and machinery. Section 284(2)(ad) provides that, for capital expenditure incurred after 4 December 2002, the rate is 12.5%]. Subsection (2) of section 285A increases this rate to 100%.

(2A) SEAI will publish the specified list on the website of SEAI and by such other means as it considers appropriate. SEAI will also amend the specified list, as necessary, and shall publish the amended specified list as appropriate.

List of equipment

(3) The specified list is confined to equipment in one of the ten technology classes included in column 1 of the Table in Schedule 4A. It must also meet the description specified in column 2 of the Table for the class of technology. From the 1^st of January 2021, equipment on the specified list must not operate on fossil fuel, other than equipment that operates on electricity generated from using such fuel.

Regulations

(4) Provision is made for the making of an Order (in the form of a Statutory Instrument) by the Minister for the Environment, Climate and Communications, (with the approval of the Minister for Finance) stating the energy efficiency criteria for each class of technology specified in column 1 of the Table in Schedule 4A.

Unavailability of accelerated allowances

(5) The increased capital allowances for energy-efficient equipment do not apply where the equipment in question is leased, let or hired to any person.

Expenditure limits

(6) The increased capital allowances for energy-efficient equipment do not apply unless the expenditure in the class of technology in question is equal to or above the limit specified in column 3 of the Table in Schedule 4A for that class. The limits range from €1,000 to €5,000.

Qualifying period

(7) Qualifying expenditure must be incurred in the relevant period which runs from the date the TCA 1997 (Accelerated Capital Allowances for Energy Efficient Equipment) Order 2008 (S.I. No. 399 of 2008) was made (it was made on 9 October 2008) to 31 December 2023. However, expenditure incurred on or after 31 January 2008, with regard to the first three classes of technology, listed in the Table in Schedule 4A but before the Order referred to above was made also qualifies for the increased capital allowances. This expenditure qualifies provided the equipment was an energy-efficient product that would have qualified under the first three classes of technology under the scheme had such an Order been made at the time the expenditure was incurred.

Machinery or plant

(8) Expenditure incurred by persons on energy-efficient equipment (as defined in the section) that would not qualify as machinery or plant for the purposes of wear and tear allowances will be treated as such for the purposes of the capital allowances provisions.

(8A) In the case of cars coming under the category “Electric and Alternative Fuel Vehicles” the accelerated allowance is based on the lower of the actual cost of the vehicle or the specified amount of €24,000 (referred to in section 380K(4)), which is the maximum limit applying in respect of capital allowances for business cars. This provision applies to cars only and not to other vehicles.

The emissions-based capital allowances scheme for cars, introduced in the Finance Act 2008 and included in Part 11C will not apply where a company opts to avail of accelerated capital allowances for fuel efficient cars under the scheme for energy-efficient equipment in section 285A. The converse also applies so that a company can opt for one scheme or the other, but not both.

(9) Provision is made for the laying of an Order by the Minister for the Environment, Climate and Communications (for the purposes of section 285A) before Dáil Éireann and the annulment of such an Order if a resolution to that effect is passed by the Dáil.

Commencement

First three classes of technology in the Table in Schedule 4A

The Minister for Finance made an Order on 9 October 2008 (S.I. No. 397 of 2008) bringing the scheme into operation while a separate Order was made on that date by the Minister for the Environment, Climate and Communications, with the approval of the Minister for Finance, establishing the first three designated classes of technology listed in the Table in Schedule 4A. A list of specified products eligible for the allowances under the first three classes of technology was included in the latter Order.

Next four classes of technology in the Table in Schedule 4A

A Commencement Order giving effect to the extension of the scheme to include the next four categories of classes of technology listed in the Table in Schedule 4A was made by the Minister for Finance on 23 March 2009 (S.I. No. 91 of 2009).

Final three classes of technology in the Table in Schedule 4A

A Commencement Order giving effect to the extension of the scheme to include the final three categories of classes of technology listed in the Table in Schedule 4A was made by the Minister for Finance on 10 May 2010 (S.I. No. 196 of 2010).

SEAI updates, on a regular basis, the list of specified eligible products qualifying for the allowance under the designated classes of technology listed in the Table in Schedule 4A. The updated list can be viewed on the SEAI website.

Relevant Date: Finance Act 2021