Company M is a property developer carrying on a relevant property development trade. Company M had a 12-month accounting period from 1 January 2025 to 31 December 2025 and a nine-month accounting period from 1 January 2026 to 30 September 2026.
Up to 1 September 2026, Company M incurs eligible expenditure of €500,000 on the construction of a completed development (apartment block 1), which is comprised of a qualifying apartment block containing 10 apartments and eligible expenditure of €1,500,000 on the construction of a second completed development (apartment block 2), which is comprised of a qualifying apartment block also containing 10 apartments.
The relevant certificate of compliance on completion for both apartment blocks is lodged with the relevant local authority on 1 September 2026.
Company M is the beneficial owner of 50% of the completed developments at the relevant date. Company M can make a claim for an enhanced deduction in the accounting period ended 30 September 2026, being the relevant accounting period.
The enhanced deduction for apartment block 1 is calculated as follows:
1. Calculate the enhanced deduction: €500,000 at 25% = €125,000
2. Verify that the amount determined does not exceed the limit: the limit is calculated as: 10 × €50,000 at 50% = €250,000
The amount calculated under step (2) is greater than the amount calculated under step (1). The enhanced deduction is €125,000.
The enhanced deduction for apartment block 2 is calculated as follows:
1. Calculate the enhanced deduction: €1,500,000 at 25% = €375,000
2. Verify that the amount determined does not exceed the limit which is calculated as: 10 × €50,000 at 50% = €250,000
The amount calculated under step (2) is less than the amount calculated under step (1). The enhanced deduction is €250,000.
Company M can claim an enhanced deduction of €375,000 in total. Where Company M’s taxable trading profits are less than €375,000 for the period ending on 30 September 2026, the enhanced deduction may result in a loss which can be relieved under the normal trading loss rules.