Taxes Consolidation Act 1997 section 81C

Emissions allowances

Section 81C sets out the tax treatment of emissions allowances purchased and sold by companies under the EU Emissions Trading Scheme.

• Emissions allowances include EU allowances, Certified Emission Reductions (CERs), and Emission Reduction Units (ERUs) as defined under the EU ETS Directive 2003/87/EC.
• The cost of purchasing emissions allowances, when charged to the profit and loss account, is treated as a deductible trading expense for corporation tax purposes, overriding the normal capital expenditure rules.
• When a company sells purchased emissions allowances, the sale proceeds are treated as a trading receipt of the company's trade, subject to the capital gains provisions in section 540A for allowances received free of charge.
• The profit and loss account is defined in accordance with generally accepted accounting practice and includes an income and expenditure account where a company prepares accounts under international accounting standards.