Revenue Note for Guidance

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Revenue Note for Guidance

CHAPTER 4

Miscellaneous and general

Overview

This Chapter sets out miscellaneous and general provisions in relation to the application of capital allowances for income tax and corporation tax purposes.

304 Income tax: allowances and charges in taxing a trade, etc

Summary

This section provides that persons liable to income tax who are claiming capital allowances under Part 9 are obliged to include Details of such claims in their annual income tax return required to be delivered under the Income Tax Acts. In general, where full effect cannot be given for such capital allowances in taxing a trade due to there being no profits or an insufficiency of profits of the trade, the unused allowances may be carried forward to the following and succeeding years and treated as part of the allowances due for those years.

Details

Application

(1) This section and section 305 apply in relation to capital allowances and charges which are to be made under Part 9 as it applies for income tax purposes.

Claims for allowances

(2) A claim by a person for any allowance in charging profits or gains of any description must be included in the person’s annual income tax return, and the allowance is to be made as a deduction in charging those profits or gains (and not as a deduction in computing those profits or gains for assessment).

(3)(a) A claim for an industrial building (initial) allowance under section 271 must include a certificate signed by the claimant stating that the expenditure was incurred on the construction of an industrial building or structure and must give such particulars as show that the allowance is to be made.

(3)(b) A claim for an initial allowance under section 283 must include a certificate signed by the claimant stating that the expenditure was incurred on new machinery or plant and must give such particulars as show that the allowance is to be made.

Carry forward of unutilised allowances

(4) Subject to the exception outlined in subsection (6)(c), if full effect cannot be given in any year to an allowance to be made under Part 9 in taxing a trade or in charging any other profits, either because there are no assessable profits for that year or because the assessable profits are too small to cover the allowance, then, so much of the allowance as is not given in that year may be carried forward for allowance in subsequent years.

Balancing charges

(5) Any balancing charge to be made for any year under Part 9 in taxing a person’s trade or in charging a person’s income under Case V of Schedule D is to be made by means of an assessment on the person.

Professions, employments and offices

(6)(a) & (b) In general, the above rules apply to professions, offices and employments as they apply to trades. However, the requirement in subsection (3)(b) regarding the making of a claim for an initial allowance under section 283 is so applied only in relation to professions as there is no entitlement to an initial allowance in the case of employments and offices.

(6)(c) Additionally, the treatment of unutilised allowances outlined in subsection (4) does not apply to allowances given by means of discharge or repayment of tax or in charging a person’s rental income under Case V of Schedule D. The treatment of these allowances is outlined in section 305.

Relevant Date: Finance Act 2018