Capital Allowances – Industrial Buildings Introduction Certain types of buildings qualify for capital allowances Referred to as industrial buildings Two types: Industrial buildings initial allowances Industrial buildings writing down (annual) allowance (IBAA)

Capital Allowances – Industrial Buildings Defined in legislation under s.268 TCA 1997 Building or structure in use: For purposes of a trade carried on in a mill, factory or similar premises For purposes of a dock undertaking For purposes of market gardening

Capital Allowances – Industrial Buildings Building or structure in use: For the intensive production of cattle, sheep, pigs, poultry or eggs For purposes of a hotel trade For purposes of a trade in caravan and camping sites For purposes of recreation of employees by employer carrying on the above trades

Capital Allowances – Industrial Buildings Building or structure in use: A lab used in relation to extraction of oil, gas or minerals A business located in certain tax designated areas Airport management and operation Aircraft maintenance

Capital Allowances – Industrial Buildings Building or structure in use: Nursing homes Childcare facilities Private hospitals and sports injury clinics Specialist palliative care

Capital Allowances – Industrial Buildings The cost of the site is specifically disallowed Cost of site development is allowed; Preparing, cutting, tunnelling, levelling land and installation of services on the site

Capital Allowances – Industrial Buildings Grant aided expenditure is specifically disallowed (excluding hotels) For hotels, receipt of grant assistance results in the building not being treated as a qualifying industrial building and no allowances are available

Capital Allowances – Industrial Buildings Excluded from definition of industrial building Buildings or structures used as a dwelling house Buildings or structures used as a retail shop Buildings or structures used as a showroom or office (administrative office not drawing office) Buildings or structures used for a purpose ancillary to any of the foregoing

Capital Allowances – Industrial Buildings Excluded from definition of industrial building TCA 1997 provides an exception when the following conditions are met: The retail shop, showroom or office must be physically part of a larger structure which qualifies, and The cost of expenditure on the retail shop, showroom or office must not exceed 10% of the gross qualifying expenditure on the total building or structure, inclusive of any grant aided expenditure but exclusive of site cost

Capital Allowances – Industrial Buildings Industrial buildings annual allowance To qualify for an IBAA the following conditions must be met: The industrial building or structure must be in use on the last day of the basis period for the purpose of a qualifying trade, and The person claiming the allowance must own the relevant interest

Capital Allowances – Industrial Buildings Industrial buildings annual allowance rates Factories, mills and docks – 4% Hotels, caravan and camp sites – 4% Nursing homes, hospitals – 15% for first 6 years and 10% in year 7 Childcare facilities – 15% for first 6 years and 10% in year 7

Capital Allowances – Industrial Buildings Industrial buildings tax life The length of the tax life is period over which capital allowances can be claimed So, for a factory the IBAA is 4%, giving a tax life of 25 years If a building is sold after its tax life has expired the vendor does not suffer a balancing charge If a building is sold before its tax life has expired a balancing allowance/charge calculation must be completed

Capital Allowances – Industrial Buildings Industrial buildings tax life The purchaser of a second hand building will not be entitled to capital allowances if the tax life of the building has expired The purchaser of a second hand building will be entitled to capital allowances if the tax life of the building has not expired, and they continue to use the building as a qualifying industrial building

Capital Allowances – Industrial Buildings Industrial buildings tax life Where the second hand building qualifies for capital allowances, the qualifying cost will be the lower of the price paid and the original cost The annual allowance available is spread equally over the balance of the remaining tax life of the building