Not all capital allowances are deductible in arriving at the amount of income chargeable to the universal social charge (USC).

The capital allowances that are deductible are those incurred on the provision, for trading purposes, of:

  • Plant and machinery
  • Vehicles used for business purposes
  • Certain types of buildings, such as factories or farm buildings

Any capital allowances due to individuals that do not actively carry on a trade are not deductible. Therefore, lessors and other passive investors, such as non-active partners in a partnership trade, will pay USC on gross income before the deduction of capital allowances. Only standard rate capital allowances are deductible. Apart from farm buildings, capital allowances that are written off over accelerated 7-year periods are not allowed.

The USC may thus be chargeable on income that is otherwise sheltered from Income taxes.

Contact Anthony Casey at 01 6766 476 for further information on this issue.

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