Accelerated Capital Allowances with Electric Vehicles - Know Your Eligibility to EV Tax Incentives
You don't have to be an accountant to make sense of the savings you and your business can make!
For products procured from 1st January 2022, equipment directly operated by fossil fuels are no longer eligible for the ACA tax incentive for energy-efficient equipment. This change is in line with wider Government policy of reducing reliance on fossil fuels and net zero emissions by 2050.
The Accelerated Capital Allowance (ACA) is an Irish tax incentive scheme that helps to promote investment in energy-efficient vehicles. The ACA is based on a 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 or income tax on trading or professional income in Ireland to deduct the full cost of the equipment from their profits in the year of purchase. As a result, the business’s taxable profits are reduced by the value of qualifying capital expenditure. By contrast, the Wear and Tear Allowance provides for the same tax reduction, but this is spread evenly over an eight-year period.
For cars coming under the category “Electric and Alternative Fuel
Vehicles” the accelerated allowance is based on the lower of the actual
cost of the vehicle or €24,000.
- Available on New 100% Electric Vehicles purchased by Ltd Company’s & Sole Traders
- Eligible candidates can claim lower of purchase price or €24,000 against trading profits in year of purchase
- Full Cap Allowance Tax saving accomplished in Year 1 of ownership
- Conventional company vehicle takes 8 years to realise this saving
- Half-Price Tolls
- Cash saving on tax liability increased cash flow
- Sole Traders are eligible for a €24,000 deduction against trade profits taxed at their effective rates
- Charge stations are also eligible for ACA, the typical cost of €1,500
Next Steps
- Decide on the new vehicle you require.
- Ensure the equipment model is eligible for ACA by checking the Triple E product register before making a purchase.
- Claim the ACA through your company’s return of income form (CT1). There is now a field for ACA on the form alongside the standard capital allowances entry field.
The ACA is subject to the same rules as the standard plant & machinery wear and tear allowance. The difference is the acceleration to 100% of capital expenditure during the first year of its purchase. You don't need approval for expenditure on energy-efficient equipment; normal self-assessment tax provisions apply.
Still unclear on whether you qualify for the ACA? Get assistance from your tax advisor or by visiting revenue.ie.
Who's Not Eligible?
- Motor distributors
- Motor Dealers
- Car Hire Companies
- Vehicles are classed as stock in trade & not eligible for ACA
- EV’s must be owned by the business
- Lease & Hire arrangements do NOT count as ownership
Electric Vehicles and BIK
Certain BIK exemptions and discounts are available where the car made available to your employee is an electric car. Electric cars are cars that get their motive power from electricity only. Hybrid cars do not qualify as electric cars. The treatment applies to both new and used cars.
You may have chosen to make an electric car available to your employee for private use between 1 January 2019 and 31 December 2022. Where this occurs, a full exemption from BIK is only available in certain circumstances.
No BIK charge to tax arises of:
- Any private use of the vehicle by your employee during 2019 or 2020 where either of the following apply:
- The OMV of the car is €50,000 or less OR
- You first made this car available to your employee between 10 October 2017 and 9 October 2018.
- Any private use of the vehicle by your employee during 2021 or 2022 where the following applies:
- the OMV of the car is €50,000 or less.
Where neither of the above apply, only a partial exemption is available.
This is granted by reducing the OMV by €50,000 when calculating the
cash equivalent for the car.
2023 to 2025 Extension of Exemption
You may choose to make an electric car available to your employee for private use in the future. Partial relief will apply in respect of cars made available between 1 January 2023 and 31 December 2025.
This relief applies by reducing the OMV of the vehicle. The reduction which applies is as follows:
- €35,000 in respect of cars made available during 2023
- €20,000 in respect of cars made available during 2024 AND
- €10,000 in respect of cars made available during 2025.
Currently, BIK on fully electric cars is 0% on an OMV (Original Market Value) up to €50,000, after €50,000 the 30% rate of Benefit-In-Kind applies. This 30% may be reduced if you incur high business mileage of more than 24,000km, however, most professional contractors would not do enough to benefit from this reduction.
Where the relief reduces the OMV to nil, a BIK charge will not arise.
Any OMV in excess of the reduction is liable to BIK in the usual manner. For more information please see
Tax and Duty Manual Part 05-01-01b.
