There are over 80 different government supports available to small businesses but many of them are not well known or understood. Each week in the SFA e-zine, we will profile a different support that could improve your business, giving you information and advice.
Accelerated Capital Allowance (ACA)
A tax incentive of 100% of expenditure on energy-efficient equipment for your business.
Eligible energy-efficient products are laid out in a list maintained by the Sustainable Energy Authority of Ireland (SEAI) under the following categories:
- Motors and Drives
- Building Energy Management Systems
- Information and Communications Technology (ICT)
- Heating and Electricity Provision
- Process and Heating, Ventilation and Air-conditioning (HVAC) Control Systems
- Electric and Alternative Fuel Vehicles
- Refrigeration and Cooling Systems
- Electro-mechanical Systems
- Catering and Hospitality Equipment
In general, capital allowances (wear and tear allowances) apply to plant and machinery and are given over an eight-year period at an annual rate of 12.5%. In the case of approved energy-efficient equipment, this rate is accelerated and the entire allowance (100% of expenditure incurred) can be claimed in the first year.
The aim of the scheme is to encourage companies to invest in energy-saving technology.
The benefits for the company are:
- Reducing your tax bill
- Increasing your cash flow
- Reducing your energy costs
The ACA is claimed through your standard annual tax return for the accounting period in which the equipment is first provided and used. There is no requirement to obtain approval before the expenditure is incurred.
A dedicated entry for this allowance is included in Form CT1 under the heading “Trading Results”. Your taxable profit will be reduced by the full cost of the equipment.
Full details can be found on the SEAI website.
If you are interested in applying, don’t forget:
- The ACA is available to companies that operate and pay corporation tax in Ireland. Budget 2017 extended the ACA scheme to include sole traders.
- Only products on the ACA Specified List qualify for the allowance.
- The equipment must be owned by the company – equipment that is leased, let or hired does not qualify.
- The equipment must be new.
- The minimum qualifying expenditure varies by category. It is €1000 for all categories except Lighting (€3000) and Building Energy Management Systems (€5000).
- Companies can opt for the ACE in relation to Electric and Alternative Fuel Vehicles, or for the emissions-based scheme, but not both.
- In the case of the sale of the equipment or it no longer being used, there may be a claw-back of the allowances.