BY SINEAD DEANE
RISING gas and energy prices have become a major cause of concern for most businesses over the last 18 months, people are considering their options such as switching suppliers or looking at investing in energy-saving technology.
Are there any tax incentives for investing in energy saving equipment or systems? is a question that is often posed to us as accountants.
The Accelerated Capital Allowance (ACA) is a tax incentive scheme that promotes investment in energy efficient products and equipment.
The following are some of the categories of equipment which may be relevant to farm businesses and that may qualify under the scheme: electric motors and drives; lighting equipment and systems; heating and electricity provision equipment and systems; electric and alternative fuel vehicles and equipment; refrigerating and cooling equipment and systems; electro-mechanical equipment and systems.
The ACA scheme is available to sole traders, farmers and companies that are liable to tax in Ireland.
Generally, when a business incurs costs on equipment, machinery, or plant, 12.5% of the cost of the item (net of vat if applicable) is claimed as a capital allowance over an eight-year period.
Under the ACA scheme this rate is accelerated, it allows participants to write off 100% of the purchase value of qualifying energy efficient equipment against their profit in the year of purchase. Claiming the relief is similar to that which applies to standard capital allowances.
To qualify for this scheme certain criteria must be met. The qualifying items must be included in the list of energy-efficient equipment maintained by the Sustainable Energy Authority of Ireland (SEAI) in order to qualify for the scheme.
This list is available for viewing on the SEAI website.
The equipment, machinery or plant must be owned by the business claiming the ACA. Equipment that is leased, let, or hired will not qualify for the scheme.
The equipment must be new.
There is a minimum amount that must be spent on the equipment to qualify for the scheme, this depends on which category the equipment falls into on the SEAI list.
While the qualifying items are used for the purpose of trade, it must be used wholly and exclusively used for the business.
The qualifying items must be in use at the end of the financial year that the ACA are claimed.
If you are considering investing in energy efficient equipment for your business, it is essential that you speak with your accountant to ensure that all the criteria for the ACA scheme are met.
• Sinead Deane is an accountant with FDC accountants in Bandon.