Universal social charge and capital allowances – 2011 Form 11

This eBrief is to make people aware of the importance of completing the Form 11 for the tax year 2011 correctly in relation to claiming capital allowances as not all capital allowances are deductible in arriving at the amount of income chargeable to the universal social charge (USC).

The capital allowances that are deductible are those incurred on the provision, for trading purposes, of:

• Plant and machinery
• Vehicles used for business purposes
• Certain types of buildings, such as factories or farm buildings

Any capital allowances due to individuals that do not actively carry on a trade are not deductible. Therefore, lessors and other passive investors, such as non-active partners in a partnership trade, will pay USC on gross income before the deduction of capital allowances. Only standard rate capital allowances are deductible. Apart from farm buildings, capital allowances that are written off over accelerated 7-year periods are not allowed. Appendix C of the USC FAQ document at www.revenue.ie contains details of both deductible and non-deductible allowances in respect of the different types of buildings.

Relevant sections on the 2011 Form 11

Capital allowances forward (line 107):

These have been split into two sections – section (a) for capital allowances that are deductible and section (b) for those that are not deductible.

Plant and machinery (line 109):

All capital allowances claimed under this heading are deductible. Vehicles used for business purposes should be entered in this section.

Industrial buildings and/or farm buildings allowances (line 110):

These have been split into two sections – section (a) for capital allowances that are deductible and section (b) for those that are not deductible.

Other capital allowances (line 111):

This section is for items other than plant and machinery such as milk quotas, dredging, mine development, petroleum development/exploration, patent rights, scientific research and know-how. These capital allowances are not deductible. Vehicles used for business purposes should not be entered in this section.