352 Accelerated capital allowances in relation to construction or refurbishment of certain industrial buildings or structures

Summary

This section provides for a special capital allowances regime in respect of capital expenditure incurred in the qualifying period on the construction or refurbishment in qualifying resort areas of certain industrial buildings or structures, namely, hotels, holiday camps and holiday cottages registered by Bord Fáilte Éireann. The special regime of capital allowances consists of —

• an industrial building (initial) allowance of 50 per cent (available to both owner-occupiers and lessors),
• annual writing-down allowances of 5 per cent (available to both owner-occupiers and lessors), and
• accelerated writing-down allowances (free depreciation) of 75 per cent (available only to owner-occupiers).

In the case of capital expenditure incurred on refurbishment, the regime applies only where the amount of such expenditure is not less than an amount equal to 20 per cent of the market value of the building or structure immediately before the refurbishment.

It should be noted that this regime displaces the capital allowances which would otherwise apply in respect of the buildings or structures in question, namely, the normal annual writing-down allowances of 15 per cent (10 per cent in year 7) for hotels and holiday camps and 10 per cent for holiday cottages.

Details

Qualifying industrial buildings or structures

(1) The section applies to certain industrial buildings or structures the sites of which are wholly within a qualifying resort area. The industrial buildings or structures covered are those in use for the purposes of a trade of hotel-keeping. By virtue of section 268(3), this includes, in addition to hotels, buildings or structures in use as a holiday camp or a Bord Fáilte registered holiday cottage.

Allowances available

Instead of the capital allowances which would normally be available (see section 272) in respect of capital expenditure incurred on the construction or refurbishment of qualifying industrial buildings or structures (namely, annual writing-down allowances of 15 per cent (10 per cent in year 7) for hotels and holiday camps and 10 per cent for holiday cottages), a special regime of capital allowances apply. It should be noted, however, that this special regime applies only in the case of capital expenditure incurred in the qualifying period (see subsection (6)). The following are the details of the special regime.

(2) An industrial building (initial) allowance of 50 per cent is made available under section 271 in respect of qualifying expenditure on the construction or refurbishment of qualifying industrial buildings or structures. The allowance is available to both owner-occupiers and lessors of such buildings or structures.

(3) Annual writing-down allowances of 5 per cent are made available under section 272 in respect of qualifying expenditure on the construction or refurbishment of qualifying industrial buildings or structures. The allowances are available to both owner-occupiers and lessors of such buildings or structures.

(4) Accelerated writing-down allowances (free depreciation) of 75 per cent are made available under section 273 in respect of qualifying expenditure on the construction or refurbishment of qualifying industrial buildings or structures. Free depreciation is available only to owner-occupiers of such buildings or structures – it is not available to lessors.

Refurbishment – additional condition for entitlement to allowances

(5) In a case where capital expenditure is incurred in the qualifying period on the refurbishment of a qualifying industrial building or structure, the special regime of capital allowances apply only if the amount of the capital expenditure so incurred at least equals 20 per cent of the market value of the building or structure immediately before that expenditure was incurred. It should be noted that the normal annual writing-down allowances of 15 per cent (10 per cent in year 7) for hotels and holiday camps and 10 per cent for holiday cottages would be available in cases where the refurbishment expenditure so incurred is less than 20 per cent of the market value of the building or structure immediately before that expenditure was incurred.

Qualifying expenditure

(6) The capital expenditure which is to qualify for the special regime of capital allowances must be expenditure incurred on construction or refurbishment work actually carried out during the qualifying period. Where work commences, but is not completed, in the qualifying period, only the part of the expenditure referable to the work carried out in that period qualifies for the special regime. Of course, title to the normal writing-down allowances under section 272 would still exist in relation to the part of the expenditure referable to work carried out outside the qualifying period.

This provision negates, for the purposes only of determining the amount of expenditure which is to qualify for the industrial building (initial allowance) and free depreciation, other provisions of the Tax Acts which, by treating expenditure as incurred later than the carrying out of the work, might otherwise deprive a person of the special regime of allowances. The provisions so negated are —

• section 279 which deals with a case where an industrial building or structure is bought before it is used or within one year of it commencing to be used and provides for certain expenditure to be treated as having been incurred when the purchase price becomes payable,
• section 316(2) which for the purposes of capital allowances for industrial buildings or structures treats expenditure as incurred when the sum in question becomes payable, and
• section 316(3) which for the purposes of industrial building (initial) allowances treats expenditure incurred before a trade commences as incurred when the trade commences.

Relevant Date: Finance Act 2019