Eoin Ó Broin
Question:128. Deputy Eoin Ó Broin asked the Minister for Finance whether there are limits on the price of cars for which tax allowances are available. [50399/23]
View answerThursday, 16 November 2023
Questions (128)
Written answers
Part 11C of the Taxes Consolidation Act (TCA) 1997 provides for a scheme of capital allowances and leasing expenses for business cars based on the level of CO2 emissions from the cars concerned. The amount of allowable expenditure for capital allowances purposes is determined by reference to the car’s level of CO2 emissions rather than on the expenditure incurred on the car. Section 19 of Finance Act 2019 revised downwards the emissions thresholds on which capital allowances and leasing expenses are based.
There is no upper limit on the expenditure of the car, however the amount of tax relief available is capped based on the emissions category. As a result, depending on the amount of the expenditure and the emissions category of the car, the amount of relief available may be less than the actual expenditure on that car.
Where expenditure is incurred on the provision or hiring of a car on or after 1 January 2021, the categories are divided into 3 different groups as follows:
• Group 1 contains categories A and B with CO2 emissions up to and including 140g/km. The allowable expenditure for this category of cars is the specified amount, currently €24,000, regardless of the cost of the car. Thus, wear and tear allowances are based on deemed expenditure of €24,000 even if the car costs more than this amount.
• Group 2 contains category C with CO2 emissions from 141g/km up to and including 155g/km. The allowable expenditure for this category of cars is the lower of 50% of the specified amount or 50% of the retail price of the car when new. Therefore, wear and tear allowances are calculated based on a maximum value of €12,000.
• Group 3 contains categories D, E and F with CO2 emissions that exceed 155g/km. These cars do not qualify for wear and tear allowances.
Where expenditure was incurred on the provision or hiring of a car on or after 1 July 2008 and before 1 January 2021, the categories are divided into 3 different groups as follows:
• Group 1 contains categories A, B and C with CO2 emissions up to and including 155g/km. The allowable expenditure for this category of cars is the specified amount of €24,000 even if the car costs more than this amount.
• Group 2 contains categories D and E with CO2 emissions from 156g/km up to and including 190g/km. The allowable expenditure for these cars is the lower of 50% of the specified amount or 50% of the retail price of the car when new. Therefore, wear and tear allowances were calculated based on a maximum value of €12,000.
• Finally. Group 3 contains categories F and G with CO2 emissions that exceed 190g/km. These cars did not qualify for wear and tear allowances.
Generally, allowances on cars are available at a rate of 12.5% per annum over 8 years. The exception to this is vehicles under the category “Electric and Alternative Fuel Vehicles” for the purposes of section 285A TCA 1997. Section 285A provides for accelerated capital allowances for energy efficient equipment. Where a vehicle is within the category “Electric and Alternative Fuel Vehicles” the accelerated allowance is based on the lower of the actual cost of the vehicle or the specified amount of €24,000. The entire allowance can be claimed in the year in which the expenditure on the vehicle is incurred provided the vehicle is in use for the person’s trade at the end of the chargeable period.
The emissions-based scheme in Part 11C TCA 1997 will not apply where a person opts to avail of accelerated capital allowances under section 285A. The converse also applies so that a person can opt for one scheme or the other, but not both, in relation to business cars.