Capital Allowance

Question 1

under normal framework where does Capital allowance falls

Answer 1

it is deducted from income

Question 2

wear and tear

Answer 2

=cost (excluding VAT) +installation cost+ relocation cost+cost of foundation/written off period*apportionment
=small assets less than 7000 are written 100%(fully)

Question 3

section 12- manufacturing plant and equipment

Answer 3

-process of manufacture( bigger assets)
=cost(lesser of the actual cost to the taxpayer and the cash cost in an arm’s length transaction) +installation/erection cost+cost of foundation or supporting cost +relocation cost*written off period ( new:on and after 1/02/2002: 40 /20/20/20, ships/aircraft/secondhand:20/20/20/20/20

Question 4

manufacturing/industrial buildings

Answer 4

-process of manufacture
=cost for taxpayer-initial allowance-recoupments*written off period from the table
-N.B we don’t Include Land

Question 5

Manufacturing/industrial building for used building

Answer 5

-allowance is claimable on new cost (purchased price)
-if purchase after 1 April 2000, and seller was allowed 10% purchaser only allowed 5%

Question 6

commercial building section 13quinn

Answer 6

-building must be new and unused
-start from 1April 2007
-cost of taxpayer (limited to the arm’s length)*5%

Question 7

residential building S13sex requirements

Answer 7

 The building must be new and unused
 Improvements must also be new and unused
 Taxpayer must own the unit
 Used solely for the purpose of trade
 Unit in RSA( Republic of south Africa)
 Taxpayer owns at least 5 residential units in RSA-used for Trade

Question 8

residential building S13sex

Answer 8

-1 October 2008
=lesser of cost and market value+direct cost +improvement+erection
-* number of units acquired
-deemed cost if taxpayer acquired part of a building( 55% of acquisition price, 30% of improvements)
-5% normal unit or 10 % low cost unit

Question 9

residential building S13sex (low cost unit )

Answer 9

 Building- cost does not exceed R300 000(excluding land and infrastructure)
 Apartment in a building-cost does not exceed R350 000

Question 10

Small business corporation (definition)

Answer 10

 CC (close corporation)/Private company (ito Company’s Act)
 Only natural persons as members/shareholders
 Gross income < R20 million
 Members/shareholders do not have shares in other companies (except listed companies…)
 <20% of the total receipts and accruals is derived from investment income and personal services rendered
 Not an employment company (cannot be a labour broker)

Question 11

plant and machinery under SBC

Answer 11

used for the first time on/after 2001
-deduct the full cost
-we also deduct full amount for 2nd hands plant and machinery
=cost is lesser of cost to SBC and arm’s length cash cost+ installation /erection cost

Question 12

relocation cost under SBC

Answer 12

100% deeduction

Question 13

non-manufacturing assets under SBC

Answer 13

• After 1 April 2005
  -not used in process of manufacture
  -written over 3 years when bought into use
  50/30/20
  -cost *50/30/3=20

Question 14

Recoupment formular

Answer 14

selling price(limited to cost) less tax value

Question 15

tax value calculation

Answer 15

=cost-capital allowance

Question 16

renewable energy S12B

Answer 16

-Assets used in the taxpayer trade for production of: Bio-fuels or generate electricity from wind power, solar power, hydropower.
-*50%/30%/20%
-brought into use for the first time

Question 17

Date building commenced before 25 march 1959

Answer 17

initial cost =none
annual allowance= none

Question 18

date building commenced
25 March 1959-30 June 1985

Answer 18

initial allowance= none
annual allowance = 2%

Question 19

date building commenced
1 July 1985-31 Dec 1988

Answer 19

initial allowance = 17.5% (must have been brought into use on/before 31 Dec 1989) \
annual allowance = 2% (on cost less initial allowance)

Question 20

date building commenced
1 Jan 1989-30 June 1996

Answer 20

initial allowance=none
annual allowance= 10% (bought into use on/before 31 March 2000)

Question 21

date building commenced
on/after 1 October

Answer 21

initial allowance =none
annual allowance= 5%