Below we will go through all the main aspects associated with tax relief on assets in your business with straightforward examples including:
- What assets you can purchase
- What you can claim back in tax
- Leasing vs buying
- Disposal of assets
What business assets can I purchase in my Limited company?
You can purchase business assets in your limited company that are required wholly and exclusively for use in the business. These can include:
- Computer equipment
- Office furniture for home office
- Motor Vehicles
- Telecoms Equipment
Can I claim tax relief on these assets?
Yes you can claim tax relief on these, however the tax relief is granted over 8 years – 12.5% per annum. This means that in year 1 you will have a Corporation tax charge on the balance that is not written off and subsequent years you will get an equivalent write off against future Corporation tax
Example of Year 1
Purchase of business equipment for €10,000
|Salary & Expenses||€90,000|
|Profit before Asset||€10,000|
|Current year allowance @ 12.5%||€1,250|
|Corporation tax @ 12.5%||€1,094|
Leasing vs Buying
If you lease the asset rather than purchase the asset outright the tax treatment is different. Whilst you can still claim the full cost of the business asset, the lease payments are written off as they are incurred. They are in effect treated like an expense and you don’t have to incur the capital cost thus reducing the corporation tax charge in accounts.
Purchase of €10,000 worth of equipment through finance lease over 4 years with payments of €2700 per annum.
|Salary & Expenses||€97,300|
|Profit before Lease payments||€2,700|
|Corporation Tax @ 12.5%||€0|
Disposal of Assets - Lease
When you dispose of asset, the net amount you receive after all lease payments have been made will be treated as a Income and subject to Corporation tax, if you receive less than the outstanding amount you will write off the loss you made.
|Total Leased Cost||€10,000|
|Payments made 36 x €225||€8,100|
|Net amount owed in year 3||€1,900|
|Tax profit on sale||€4,100|
|Corporation Tax due||€513|
Disposal of Asset – Purchase Outright
A balancing allowance or balancing charge will apply should you make a profit or loss on the sale of an assets depending on sale price and Tax written down value.
You sell the asset originally in Year 3 for €6,000 originally valued at €10,000. The year 3 write off will be €1500.
|Purchase of Asset||€10,000|
|Year 1 write off||-€1,250|
|Year 2 write off||-€1,250|
|Tax written down value||€7,500|
|Tax loss on sale||€1,500|
See below, our guidance on the capital allowances for Motor Vehicles.
- Passenger vehicles are restricted to €24,000 over 8 years
- Electric Vehicles restricted to €24,000 (however may be full claimed in Year 1)
- Commercial Vehicles fully claimable
- BIK on Motor Vehicles
- Items purchased for personal use, but put purchaseds through company, this could give rise to a tax liability in event of audit, the items should be purchased wholly and exclusively for purpose of contract
- Private use of Company assets, this may incur a Benefit in Kind, see our Motor Vehicle factsheet for the rates for Company vehicles.
If you have any questions on Tax relief on Business Assets or would like to get a personalised example, don't hesitate to contact our Advisory team by email at email@example.com, call 01 8077106 or your account manager and they can arrange a consultation with one of our Accountants. We can then personalise a computation for you.