Tax Depreciation Reports

Transcription

1 Tax Depreciation Reports

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3 TAX DEPRECIATION REPORTS INTRODUCTION BENEFITS Our Tax Depreciation Team consists of Chartered Engineers and Chartered Tax Advisors, who work extensively on preparing optimised and compliant tax depreciation/capital allowances claims. Availing of capital allowances allows for the full write off of the qualifying expenditure on plant and machinery ( P&M ) over a period of eight years at 12.5% per annum. Certain energy efficient equipment qualify for accelerated capital allowances ( ACAs ). These allow companies to write off 100% of the purchase value against the company s profit in the year the equipment is first used. A Tax Depreciation Report ( TDR ) identifies and quantifies qualifying capital expenditure on P&M which may be used to significantly reduce one s income tax or corporation tax liability, as appropriate. A TDR is a valuable asset for those claiming capital allowances on qualifying expenditure. Those who may benefit from a TDR include: property developers developing new buildings, retro-fitting or renovating existing buildings; landlords/owner-occupiers carrying out refurbishment or fit-out projects; tenants who carry the burden of wear and tear of qualifying P&M; purchasers of new and relatively new buildings; and funds/reits on a sale of a building. 1

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5 TAX DEPRECIATION REPORTS COMPLEXITY The area of capital allowances concerning qualifying expenditure on P&M is complex as there is no legislative basis as to what constitutes plant. Reference must therefore be made to the extensive body of case law and our prior experience in this area. Whether an item qualifies must be determined by reference to the facts, the nature of the trade and the function of the item in the trade. As Revenue is active in auditing claims in this area adequate supporting evidence and documentation is important in the preparation of compliant TDRs which stand up to scrutiny. WHERE ERRORS MAY ARISE Identifying one s entitlement to claim capital allowances is generally determined by who bears the burden of wear and tear. Determining where the burden of wear and tear lies is important as capital allowances cannot be claimed by both the lessor and lessee on the same item of plant. This is a complex issue and may hinge on: - the leasehold term; - the design life of the plant; - the wording in a leasehold agreement; and - the condition in which the plant is to be returned at the end of a lease. Lack of sufficient documentation in supporting a claim may cast doubt over its eligibility and impact its ability to withstand Revenue scrutiny. An excessive claim may leave one open to payment of back-taxes due, interest, penalties and, in extreme cases, publication in the list of tax defaulters. Incorrect treatment of certain types of expenditure may result in inadequate claims and under-claiming of allowances to which one is entitled. STEPS INVOLVED There are various stages involved in the preparation of a TDR including: attending meetings with the client s representatives, various design team members, estate agents; reviewing of Bill of Quantities, construction drawings and specifications from which the relevant information is extracted for inclusion in the TDR; identifying any issues which could reduce the claim such as the presence of a sinking fund, the availability of grants, where the burden of wear and tear rests, etc.; applying relevant case law to the facts in justifying the inclusion of items of expenditure; and negotiating the claim with Revenue, where required. 3

6 WILLIAM FRY TAX ADVISORS / TAXAND IRELAND William Fry Tax Advisors specialises in providing practical and concise taxation advice to the corporate and construction sectors in general. William Fry Tax Advisors is, exclusively, Taxand Ireland. With more than 400 tax partners and over 2000 advisers in 50 countries, Taxand is the world s largest independent organisation of tax advisers to multinational businesses. We grasp both the fine points of tax and the broader strategic implications, helping you mitigate risk, manage your tax burden and drive the performance of your business.

7 TAX DEPRECIATION REPORTS COMMERCIAL DEVELOPMENT CASE STUDY Office development comprising 6,000sqm with main contract sum of 15,972,000, of which: 2,410,000 expenditure on P&M qualified for standard capital allowances (SCAs); and 410,000 qualified for accelerated capital allowances (ACAs). Standard capital allowances 2,410,000 Accelerated capital allowances 410,000 Main Contract less capital allowances 13,152,000 Year 1 SCAs + ACAs 711,250 Years 2 to 8 SCAs 301,250 Totals Capital allowances over 8 years 2,820,000 OUR TEAM Our team holds professional qualifications in: taxation - AITI Chartered Tax Adviser (CTA); legal - qualified solicitors; accounting - ACA/ACCA qualified; construction project management; town planning; and engineering. The team has also gained considerable professional experience in the construction sector, both in consultancy and on site. As such, with the combined technical skill-sets and knowledge-base we have the requisite experience to engage with other construction design professionals to compile comprehensive and optimised TDRs. Martin Phelan T: E: martin.phelan@williamfry.com Dominic O Shaughnessy T: E: dominic.oshaughnessy@williamfry.com Brian Duffy T: E: brian.duffy@williamfry.com Shane Wallace T: E: shane.wallace@williamfry.com 5

8 DUBLIN LONDON NEW YORK SAN FRANCISCO SILICON VALLEY T E. info@williamfry.com williamfry.com William Fry. All rights reserved. (TDE0417)