Revenue Note for Guidance

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Revenue Note for Guidance

692 Development expenditure: allowances and charges


This section provides for a 100 per cent writing-down allowance for capital expenditure incurred on production and development in connection with a relevant field being worked in the course of carrying on a petroleum trade. The allowance will be available for the period in which the asset represented by the expenditure is brought into use for the purposes of the trade, subject to production in commercial quantities having begun in the relevant field in respect of which the assets were provided. Assets leased to a person for the purposes of a petroleum trade will, broadly, be treated in the same manner.


(1) The provisions of the tax code (other than those excluded by subsection (4)) relating to expenditure on machinery or plant are applied to items of development expenditure which are not machinery or plant as identified in paragraph (a) of the definition of “development expenditure” in section 684.

(2) A 100 per cent writing-down allowance is provided for capital expenditure on assets representing development expenditure.

(3) Allowances for development expenditure cannot be granted in respect of periods ending before production of petroleum in commercial quantities begins. The 100 per cent allowance for development expenditure is a generous allowance and it is appropriate that it should be tied in with the ultimate object of all tax incentives in this area, that is, the achievement of commercial production of oil and gas. If producers were allowed set development expenditure allowances off against income from other petroleum activities before commercial production began in the field in question, the incentive to develop the field to the point of commercial production would be significantly reduced. Linking the tax allowance to achievement of production from the field for which the assets representing the development expenditure were provided means that the tax incentive is targeted directly at its object, that is, the production of Irish oil and gas.

(4) Development expenditure which qualifies for the 100 per cent write-off cannot qualify for capital allowances provided under other provisions of the tax code.

(5) Lessors of assets representing development expenditure will be entitled to 100 per cent writing down allowances in respect of their expenditure. However, by virtue of paragraph (a)(ii) of this provision, the ring-fence imposed by section 403 on the set-off of capital allowances arising in a leasing trade will also apply to capital allowances granted to lessors in respect of assets representing development expenditure.

Relevant Date: Finance Act 2021