Dáil Éireann Debate, Tuesday - 7 July 2020
172. Deputy Brendan Griffin asked the Minister for Finance if 2020 renovation expenditure on a bed and breakfast can be claimed as tax relief in 2021 (details supplied) in view of the fact there will be no income in 2020 due to the Covid-19 crisis; and if he will make a statement on the matter. [14179/20]
View answerI am advised by the Revenue Commissioners that renovation expenditure on a bed and breakfast (B&B) could, depending on the type of expenditure involved, either be regarded as capital or revenue in nature.
Where accommodation is provided as part of the carrying on of a B&B trade, in computing the profits chargeable to tax, a deduction will be available for expenditure that is revenue in nature and which is expended wholly and exclusively for the purposes of the B&B trade. For example, this might include the cost of repainting a bedroom or purchasing bed linen.
If the expenditure is capital in nature and qualifies for wear and tear (capital) allowances, the amount of taxable profits of the B&B trade may be reduced by the amount of the wear and tear allowances. Capital expenditure incurred on plant and machinery (fixtures and fittings) in use for the purposes of a B&B trade can be offset against trading profits at a rate of 12.5% per annum over 8 years. Renovation work to a building which is used for the purposes of carrying on a B&B trade will generally not qualify for capital allowances. However, if any expenditure is in respect of the refurbishment of a Guest House which is registered with Fáilte Ireland, it may qualify for wear and tear allowances of 4% per annum over 25 years. Renovation expenditure on a B&B located in a Special Regeneration Area under the Living City Initiative may qualify for a wear and tear allowance of 15% per annum over 7 years.
If the B&B trade is carried on by an individual (sole trader), any expenses of a revenue nature will be taken into account in computing the amount of any trading profit or loss arising in 2020. In addition, the individual can use any available wear and tear allowances relating to capital expenditure to create or augment a trading loss that can be set against other taxable income in 2020. Any remaining trading loss or excess capital allowances can be carried forward for offset against profits of the B&B trade in 2021 and future years.
If the B&B trade is carried on through a company, available wear and tear allowances are taken into account in computing the amount of any trading profit or loss for the accounting period. If the company has a trading loss in 2020, it can offset that loss against taxable profits in the current and preceding accounting periods and carry forward any balance remaining for offset against trading profits in its 2021 and future accounting periods.
