PART 11C

EMISSIONS-BASED LIMITS ON CAPITAL ALLOWANCES AND EXPENSES FOR CERTAIN ROAD VEHICLES

Overview

This Part provides that, with effect from 1 July 2008, the scheme of capital allowances and leasing expenses for business cars will be based on the level of CO₂ emissions from the cars concerned, rather than on the cost of the vehicles, as had previously been the case (sections 380K and 380L).

Cars are categorised by reference to CO₂ emissions, and are consistent with emission bands applicable under the VRT system. There are effectively 3 categories of cars to which different capital allowances arrangements apply:

• The first category covers cars with emissions of up to and including 155 grammes of CO₂ per kilometre driven. For cars in this category, the car value threshold or limit of €24,000 applies regardless of the cost of the car. This means that in the case of low emissions cars, capital allowances of €24,000 are available even if the car costs less than that.
• The second category is for cars with emissions of over 155 grammes and up to and including 190 grammes of CO₂ per kilometre driven. Cars in this emissions range qualify for allowances of either half the car value threshold of €24,000 or half the cost of the car, whichever is the lower. This means that cars in this range get capital allowances of a maximum of €12,000 no matter how expensive they are.
• Cars with emissions of over 190 grammes of CO₂ per kilometre driven get no relief at all.

Capital allowances are spread over 8 years at the rate of 12.5 per cent per annum.

For leasing expenses, cars in the lowest emitting category benefit from a proportionately higher deduction that the actual leasing expenses where the cost of the car is less than €24,000. Cars in the second category get the lesser of half of the leasing expenses incurred or half the leasing expenses on a car costing €24,000. Cars with emissions of over 190 grammes of CO₂ per kilometre driven or over get no deduction for leasing expenses. These expenses are allowed over the period of the primary lease, (section 380M).

Finally, provision is made to address circumstances in which a car which had been leased is ultimately acquired by the lessee (section 380O) or where a car reverts to the original owner having first been the subject of a hire purchase agreement (section 380N).

As with the current arrangements, cars acquired for short term hire, such as taxis, car rental etc., are ambit the terms of these provisions, (section 380P).

380K Interpretation and general (Part 11C)

Summary

A new regime of capital allowances and leasing expenses for business cars came into effect from 1 July 2008. Capital allowances and leasing expenses are now based on the level of a car’s CO₂ emissions. Cars are categorised by reference to CO₂ emissions, with the categories being fewer than, but consistent with, emission bands applicable under the VRT system. There are now effectively 3 categories of cars to which different arrangements apply.

The new regime applies to expenditure incurred on the provision or hiring of a car on or after 1 July 2008 (section 31(2) Finance Act 2008). However, in practice Revenue will not seek to impose the new rules where a lease was entered into before 1 July 2008 but the lease payments are made after that date.

As is the case under the previous capital allowances regime, the allowances are spread over 8 years at the rate of 12½% per annum.

Details

(1) Private passenger-type cars are identified as the target of these provisions and Part 11, which provides for the scheme up to 1 July 2008, is disapplied.

A company can choose to avail of either the Part 11C provisions or accelerated capital allowances for fuel-efficient cars under the scheme for energy-efficient equipment in section 285A.

(2) Various categories of car (A to G) are defined to which the new provisions apply. These categories are based on CO₂ emissions as set out in the Table to the section and by reference to the relevant emissions certificate.

(3) Where the Revenue Commissioners are not satisfied with the accompanying documentation or where there is no documentation, then the vehicle is deemed to be in Category G, in respect of which no deduction is allowed.

(4) The “specified amount” is defined as €24,000 for an accounting period or basis period ending on or after 1 January 2007, and “CO₂ emissions” as the vehicle emissions measured in accordance with the relevant EU Council Directive.

(5) This Part is construed together with Part 9.

Relevant Date: Finance Act 2019