283 Initial allowances

Summary

An initial allowance is given in respect of capital expenditure incurred on the provision of new machinery or plant (other than road vehicles) for the purposes of a trade. The allowance is given for the accounting period in which the expenditure is incurred in the case of corporation tax and for the year of assessment in the basis period for which the expenditure is incurred in the case of income tax, and is available only in certain cases.

The allowance is available where such machinery or plant is provided for use in certain trades carried on in the Shannon Airport Area or the Custom House Docks Area, or for the purposes of a project approved of by an industrial development agency in the period from 1 January, 1986 to 31 December, 1988 where the capital expenditure on its provision was incurred before 31 December, 1996. In such cases, an initial allowance of 100 per cent of the capital expenditure incurred is available.

The allowance is also available where such machinery or plant is provided for the purposes of a project approved for grant assistance by an industrial development agency in the period from 1 January, 1989 to 31 December, 1990 and the capital expenditure on its provision is incurred before 31 December, 1997 (or before 30 June, 1998 where a legal dispute gave rise to a delay) or, in the case of any such project which is on the approved list for “section 130 loan financing”, before 31 December, 2002. In such cases, an initial allowance of 50 per cent of the capital expenditure incurred is available. Where in any such case an initial allowance is made for a chargeable period in respect of capital expenditure incurred on or after 1 April, 1989, a wear and tear allowance under section 284 cannot be made in respect of the machinery or plant for the same chargeable period and no accelerated wear and tear allowances under section 285 can be made in respect of the machinery or plant for any subsequent chargeable period.

Details

Definitions

(1) “industrial development agency” is the Industrial Development Authority, Shannon Free Airport Development Company Limited or Údarás na Gaeltachta.

“new” means unused and not secondhand, but a ship is treated as new even if it has been used or is secondhand.

Conditions for allowance

(2) An initial allowance is given where —

• a person carrying on a trade chargeable under Case I of Schedule D incurs capital expenditure on the provision for the purposes of the trade of new machinery or plant other than road vehicles,
• that machinery or plant is qualifying machinery or plant (see subsections (4) and (5)), and
• that machinery or plant while used for trading purposes is wholly and exclusively so used.

The allowance is made for the chargeable period related to the expenditure, that is, in the case of corporation tax, for the accounting period in which the expenditure is incurred and, in the case of income tax, for the year of assessment in the basis period (see section 306) for which the expenditure is incurred.

Qualifying machinery or plant and rates of initial allowance

(3)(a) An initial allowance of 100 per cent of the capital expenditure incurred is available where new machinery or plant (other than road vehicles) is provided —

• (4)(a)(i) before 23 April, 1996 for use for the purposes of relevant trading operations carried on by companies in the Shannon Airport Area (section 445) or the Custom House Docks Area (section 446); but, in the case of capital expenditure incurred on or after 6 May, 1993, excluding any machinery or plant provided by a lessor to a lessee other than where the leasing of the machinery or plant is part of those relevant trading operations,
• (4)(a)(ii) by a company on or after 23 April, 1996 for use for the purposes of such relevant trading operations carried on by the company, excluding any machinery or plant provided by a lessor to a lessee other than where the leasing of the machinery or plant is part of those relevant trading operations, or
• (4)(b) for a project approved by an industrial development agency in the period from 1 January, 1986 to 31 December, 1988 where the expenditure on the provision of the machinery or plant was incurred before 31 December, 1996.

(3)(b) & (5) An initial allowance of 50 per cent of the capital expenditure incurred is available where new machinery or plant (other than road vehicles) is provided for a project approved for grant assistance by an industrial development agency in the period from 1 January, 1989 to 31 December, 1990 and the expenditure on the provision of the machinery or plant is incurred before 31 December, 1997 (or before 30 June, 1998 where a legal dispute gave rise to a delay) or, in a case where the project is on an approved list for “section 130” loan financing, before 31 December, 2002.

Availability of wear and tear allowances and accelerated wear and tear allowances

(6) In the case of machinery or plant which qualifies for the initial allowance of 50 per cent (see subsection (5)), if the initial allowance is given for a chargeable period in respect of capital expenditure incurred on or after 1 April, 1989 —

• a wear and tear allowance under section 284 in respect of the machinery or plant is not to be given for the same chargeable period, and
• accelerated wear and tear allowances under section 285 in respect of the machinery or plant is not available for any subsequent chargeable period.

Limit on initial allowance

(7) An initial allowance made to a person for any chargeable period cannot exceed such amount as, when added to the aggregate of any wear and tea allowances (section 284) made to the person in respect of the machinery or plant for that chargeable period or previous chargeable periods and any initial allowance made to the person in respect of the machinery or plant for previous chargeable periods, equals the amount of the expenditure incurred by the person on providing the machinery or plant.

Relevant Date: Finance Act 2019