Taxes Consolidation Act 1997 section 297

Subsidies towards wear and tear

Section 297 provides for a notional wear and tear allowance to be taken into account where a person receives untaxed payments as compensation for the depreciation of machinery or plant used for trade purposes, thereby reducing any balancing allowance or increasing any balancing charge on a subsequent disposal.

• Where a balancing event occurs and a person has received sums for the wear and tear of machinery or plant that were not taxed as income, a notional wear and tear allowance is deemed to have been made equal to the total of those untaxed sums.
• The effect of this notional allowance is to reduce the expenditure unallowed, which in turn reduces any balancing allowance or creates or increases a balancing charge on disposal of the asset.
• This provision most commonly applies to employees who receive car depreciation payments from their employer, as such payments are generally not taxable income because they do not generate a profit for the employee.
• Any balancing charge arising under this section cannot exceed the total capital allowances actually made to the person in respect of the machinery or plant.