Revenue Note for Guidance

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Revenue Note for Guidance

316 Interpretation of certain references to expenditure and time when expenditure is incurred

Summary

This section provides rules for the interpretation of references to “capital expenditure” and “capital sums” as used in Part 9. It also provides, in general, that references in Part 9 to the date on which expenditure is incurred are to be taken as references to the date when the sum in question becomes payable.

However, in the case of capital expenditure incurred on the construction or refurbishment of buildings and structures under a number of tax incentive schemes, expenditure is treated as incurred in a period, or on or before a specified date, only to the extent that it is attributable to work actually carried out in the period or on or before that date.

For the purposes of the industrial buildings (initial) allowance and the initial allowance in respect of machinery or plant, expenditure incurred before trading commences is deemed to have been incurred on the first day of trading.

Details

Capital expenditure and capital sums

(1) For the purposes of Part 9 (capital allowances for industrial buildings or structures, machinery or plant and dredging), capital expenditure and capital sums do not include any expenditure or sum which may be deducted in computing the profits or gains of a trade, profession, office or employment for tax purposes. In other words, the terms in question do not include revenue type expenditure. Similarly, capital sums received do not include any amount which is to be treated as a receipt in computing the profits or gains of a trade, profession, office or employment, that is, revenue type receipts are excluded. Finally, capital expenditure and capital sums do not include any expenditure or sum from which tax is or may be deducted under section 237 (annual payments made wholly out of taxed income) or section 238 (annual payments not payable out of taxed income).

Date on which expenditure is incurred

(2) For the purposes of Part 9 (capital allowances for industrial buildings or structures, machinery or plant and dredging), the date when expenditure is incurred is to be taken as the date when the sum in question becomes payable. However, in the case of wear and tear allowances for machinery or plant (section 284), this rule applies only in respect of machinery or plant provided on or after 6 April 1996.

Hotels, holiday camps and registered holiday cottages

(2A) In relation only to claims for allowances under Chapter 1 of this Part, capital expenditure incurred on the construction or refurbishment of a building or structure in use for the purposes of the trade of hotel keeping (or a building or structure deemed to be in use for such purposes by virtue of section 268(3) i.e. registered holiday camps and registered holiday cottages) will be treated as having been incurred on or before 31 July 2008 to the extent that such expenditure is attributable to work on the construction or refurbishment of the building or structure which is actually carried out on or before that date. [This date relates to the change in annual rates of allowances for hotels and holiday cottages from 15 per cent per annum to 4 per cent per annum, and the termination of allowances for holiday cottages].

Tax Incentive schemes – when expenditure incurred

(2B) In the case of capital expenditure incurred on the construction or refurbishment of buildings and structures under a number of tax incentive schemes, expenditure is treated as incurred in the year 2006, the year 2007 and the period 1 January 2008 to 31 July 2008 only to the extent that it is attributable to work actually carried out in the period involved. The same rule applies in relation to expenditure incurred in the period 1 May 2007 to 30 April 2010 in relation to qualifying residential units – where section 270(8) applies.

The schemes involved are those listed in paragraphs (a) to (i) of section 270(4). They are:

  1. hotels, holiday camps and registered holiday cottages – under section 268(1)(d) and 268(3);
  2. sports injuries clinics – under section 268(1)(k);
  3. multi-storey car-parks – under section 344;
  4. industrial buildings and commercial premises located in Urban Renewal areas and commercial premises on qualifying streets under the Living over the Shop scheme – under sections 372C and 372D;
  5. industrial buildings and commercial premises located in Rural Renewal areas – under sections 372M and 372N;
  6. Park and Ride facilities and commercial premises on the sites of Park and Ride facilities – under sections 372U and 372W;
  7. industrial buildings and commercial premises located in Town Renewal areas – under sections 372AC and 372AD;
  8. Third-Level College buildings – under section 843, and
  9. qualifying residential units associated with registered nursing homes – under section 268(3A).

This provision is required in view of the restrictions, to 75 per cent and 50 per cent respectively, which apply under section 270(5) to expenditure incurred in the year 2007 and the period 1 January 2008 to 31 July 2008 (or the period 1 May 2007 to 30 April 2010 for qualifying residential units), and of the overall cap on expenditure, under section 270(7), which applies for the period 1 January 2007 to 31 July 2008 in the case of some of these schemes (see notes on section 270). The year 2006 is included in this provision (and in section 270(4)) to ensure that expenditure is not brought forward into that year to try and avoid the restrictions mentioned above.

(2B)(d) In the case of qualifying residential units, where section 270(8) applies, the period 1 May 2007 to 30 April 2010 is included as reduced levels of capital expenditure apply i.e. 75 per cent for companies and 50 per cent for individuals. Where section 270(8) does not apply, the restriction for 2007 to 75 per cent is applicable for all claimants for the period 25 March 2007 to 31 December 2007 and the 50 per cent restriction applies for the period 1 January 2008 to 31 July 2008.

Certain health-related facilities and aviation services facilities – when expenditure incurred

(2C) In the case of capital expenditure incurred on the construction or refurbishment of a building or structure in use as a registered nursing home (section 268(1)(g)), a convalescent home (section 268(1)(i)), a qualifying hospital (section 268(1)(j)), a qualifying mental health centre (section 268(1)(l)) or an aviation services facility (section 268(1)(n)), expenditure is treated as incurred on or before the termination dates for those schemes only to the extent that it is attributable to work actually carried out on or before those dates. The termination dates are contained in paragraphs (d), (f), (g), (h), (i) and (j) of section 268(9).

Pre-trading expenditure

(3) For the purposes of the industrial buildings (initial) allowance (section 271) and the initial allowance in respect of machinery or plant (section 283), expenditure incurred before trading commences is deemed to have been incurred on the first day of trading.

Relevant Date: Finance Act 2020