What is the Accelerated Capital Allowance?
The Accelerated Capital Allowance (ACA) is a tax incentive scheme that promotes investment in energy efficient products & equipment. The ACA is based on the long-standing ‘Wear and Tear Allowance’ for investment in capital plant and machinery, whereby capital depreciation can be compensated through a reduction in an organisation’s tax liability.
The ACA scheme allows a sole trader, farmer or company that pays corporation tax in Ireland to deduct the full cost of the equipment from their profits in the year of purchase. As a result, the reduction in tax paid by the organisation in that year is currently 12.5% of the value of capital expenditure. By contrast, the Wear and Tear Allowance provides the same tax reduction, but this is spread evenly over an eight-year period.
The ACA scheme allows companies, farmers and sole traders based in the Irish Republic to deduct the entire cost of the equipment from their profits during the year of purchase. As a result, a 12.5% reduction is permitted in that year to be deducted from the value of capital expenditure.
Eligibility for ACA
Companies, sole traders, and farmers that operate and pay corporation tax in Ireland can avail of the ACA scheme.
The equipment purchased must be new and bought for use in a trade. It cannot be leased, let or hired to any person.
ACA can be claimed for the accounting period in which the equipment was first provided, as long as the equipment is included on the published list at some stage during that accounting period.
Eligible costs and minimum expenditure
ACA is available for costs directly related to providing the equipment.