Case study - Wear and tear allowances on an office purchase

The project comprised the valuation of wear and tear allowances on the purchase of a €10.2m six-storey modern office property in Dublin 2 by a property investment company.

What we did

  • Wear and tear allowances for plant and machinery fixtures in property purchases are available on the basis of an apportionment of the purchase price.
  • An initial due diligence review was undertaken to establish a legal entitlement for the purchaser to make a claim.
  • A detailed site survey was undertaken to obtain records of all elements of the purchase and information about specific claimable items.
  • An analysis of the relevant information was undertaken. This included a reconstruction cost estimate for the property, a valuation of the plant and machinery in the property and a bare site land valuation. An apportionment of these values was then applied to the purchase price paid. Our results were reported to our client in report format, summarising the results of our analysis and the legal basis for the claim.
  • Our report was submitted by the client with their tax return providing justification for the capital allowances claimed on their tax return.

Outcome

Almost €2,700,000 or 26% of the purchase price qualified for wear and tear allowances. The property investment company used the wear and tear allowances to offset against their taxable profits providing cash savings of approximately €675,000, realised over eight years.

Cumulative tax saving at 25% corporation tax rate
Cumulative tax saving at 25% corporation tax rate

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