How to Reduce Your Tax Liabilities with Embedded Capital Allowances

May 24, 2023

How to Reduce Your Tax Liabilities with Embedded Capital Allowances

Are you doing all you can to reduce your Tax liability? 

We recently had a client that saved €113,000 in tax over 8 years by working with us and our experienced team of experts. So if you own a commercial property you may be entitled to claim embedded Capital allowances which will overall reduce your tax liability.  

Embedded Capital Allowances relate to items of Plant and Machinery which are hidden in the overall fabric of a building. These qualifying elements are typically categorised as heating, electrical, security, fire/smoke alarm, lift installations, emergency lighting, sanitary ware, etc.

Capital Allowances often remain unclaimed because of a lack of appropriate documentation necessary to support a claim. Identification and quantification of these allowances is a specialist task which would be outside the scope of work included in the preparation of routine tax returns. The amounts involved can often be substantial and can lead to both reductions in future tax liabilities and refunds of tax already paid.

For example: A commercial office building developed for €1,000,000.00 could typically have up to 35% / €350,000.00 of embedded plant and machinery, which would equate to a tax saving of - 

  • €43,750.00 for a limited company (paying CT at 12.5%).
  • €131,250.00 for a limited company leasing the property (CT at 12.5% + 25% surcharge) 
  • €175,000.00 for an individual (paying income tax at 50%).

Typical levels of Capital Allowances:

Property Type - Examples

Acquisition*/Developed Properties

Property Extensions / Refurbishments

Industrial Buildings

15%  -  20%

15%  -  35%

Office Buildings 

25%  -  35%

40%  -  75%

Bars / Restaurant / Hotels

30%  -  45%

50%  -  85%

Care Homes / Surgeries / Clinics

30%  -  45%

50%  -  85%

Petrol Service Stations

30%  -  40%

35%  -  75%

Supermarkets / Retail Units

25%  -  35%

50%  -  85%

*  General CA Range (after adjustment for site value) as a % of Capital Spend

Action Required:

If you have purchased/developed commercial property or carried out extensions/alterations/refurbishment of commercial property, it is probable that you have unclaimed embedded capital allowances. 

Why Action is Required

It is critical that this assessment is carried out before their opportunity to claim is lost. Even if you don’t have a current tax liability, once secured, these allowances can be held and utilised in the future. They are of significant value and can be sold on with the building. 

Secured Capital Allowances may entitle you to an immediate tax rebate from the Revenue.

If you are considering the sale of commercial premises, establishing a future stream of tax allowances available to a purchaser can enhance the value of the building. 

Similarly, if you are considering the purchase of a commercial premise, or have recently done so, a claim for embedded capital allowances can reduce the overall cost to you.

In conclusion, if you own a commercial property, it is essential to consider the potential tax savings that could be achieved through embedded Capital Allowances.

If you would like to talk to us about carrying out this audit please contact our office as soon as possible and we can discuss the next steps. 

If necessary, we will organise a review of your premises by our specialist capital allowances surveyor, free of charge, who will assess the eligibility and approximate value of a successful claim.

Fill in our the contact form by following this link and we will be in touch 

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