Tax Tips April 2019
Accelerated capital allowances – Childcare and Fitness Centre Facilities
Revenue published new guidance on the provisions introduced in Finance Act 2018 regarding accelerated capital allowances for the provisions of child care services or fitness centre facilities.
Finance Act 2018 introduced a new incentive for the provision of childcare services or fitness centre facilities to employees. The incentive makes accelerated allowances available for capital expenditure incurred by employers on or after 1 January 2019, on the construction of such facilities and on childcare and fitness centre equipment. The scheme of accelerated allowances is provided for undersections 285B and 843B of the Taxes Consolidation Act (TCA) 1997.
Construction of Childcare and Fitness Centre Facilities:
Capital allowances in the form of industrial buildings annual allowances (IBAA’s) can be claimed on qualifying expenditure on a qualifying premise.
A qualifying premise is a building/structure used for the provision of childcare services or fitness centre facilities exclusively for employees of a business, and not the general public. If the employer is a company, the facilities can also be made available to the employees of a connected company and the relief can still be claimed. Relevant requirements of the Childcare Act 1991 Regulations must be met in the case of childcare facilities.
Qualifying expenditure is expenditure on the construction or refurbishment of a qualifying premises.
IBAA’s are generally given over a 25-year period at a rate of 4% of the expenditure incurred. However, in the case of a qualifying premises, the rate is accelerated and can be claimed at a rate of 15% over 6 years and 10% in year 7.
Childcare and Fitness Centre Equipment:
Wear and tear allowances are generally given over an eight-year period (12.5% rate) for machinery/ plant used in connection with the trade. However, where childcare and fitness centre equipment is provided for employees, this rate is accelerated to 100%. This means that 100% of the capital expenditure incurred on childcare or fitness centre equipment for employees’ benefit can be claimed in full for the first year in which the equipment is used.
How to Claim the Relief
This relief can be claimed by the employer on their Form 11 or Form CT1, depending on the return that the employer regularly submits. It can be claimed in the chargeable period in which the conditions are met.
For detailed information on the conditions to be satisfied please refer to the Revenue Guidance.