Capital Allowances Flashcards

1
Q

s11(e): Wear and Tear Allowance on moveable assets used for trade

A

Requirements :
Any moveable asset
- Owned by the taxpayer or acquired under para (a) of instalment credit agreement
- To extent used for the purposes of trade.
- If 12C doesn’t apply, apportion: time & extent of trade

Allowance based on:
Value: Lower
-	Cost and MV 
If leased asset: less GRV (GRV= the amount you know you going to receive at the end) 
From date brought into use

Rate: IN 47

  • Small asset (<7000) full
  • If leased assets: It is the longer of lease period and IN 47

Other:
Foundations
- Integrated with the (designed for) asset and the useful life of which is limited to that of the asset may be written off on the same basis as the asset.
Moving costs
- Written off in equal instalments over the remaining write-off period of the asset, including the year in which the moving costs are incurred.
- If the asset is already written off, the moving costs may be claimed in full in the year incurred.
NB: Apportion for days i.e. not annual figures
No allowance for building or structures of a permanent nature

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2
Q

s12C: Manufacturing and Research

A

Requirements:

  • Owned
  • Brought into use for the first time in the taxpayers trade
  • Directly in process of manufacture

Allowance based on:
Lesser of Cost or arms length cash cost. (incl direct cost of installation)
- No cost no allowance

Rate:

  • If new and unused: 40/20/20/20
  • If 2nd hand 20/…..

Other:
Can claim allowances on improvements if integrated with asset.
Moving expenses included

So, same as 11(e)

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3
Q

s12E: Small Business Corporations - s12E(1)

A
Requirements:
s12E(1): like s12C
-	Plant and machinery
-	Owned by TP
-	Brought into use for first time into TP trade
-	Directly in process of manufacture
Allowance based on:
Lesser of cost or arms length cash cost (mv)
-	Incl cost of installation/ erection
-	No cost no allowance – look to s11(e)
-	Moving cost same as s12C

Rate:
100% in first year

Other:
Small business corporation s12E(4):
- CC or private company
- All members/ shareholders natural persons
- Gross Income less than R20m (apportion for part years)
- No member/SH has interst or holding in ANY other company other than:

  • Listed company
  • Collective investment scheme in securities
  • Not more than 20% of (total receipts or accruals, not of a capital nature, plus capital gains) from investment income and rendering of a personal service
  • Not a personal service provider
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4
Q

s12E: Small Business Corporations - S12E(1A)

A

Requirements:
S12E(1A): s11(e)
- Assets for trade that would have otherwise qualified for s11(e)

Allowance based on:
Lesser of cost or arms length cash cost (mv)
-	Incl cost of installation/ erection
-	No cost no allowance – look to s11(e)
-	Moving cost same as s12C

Rate:
50/30/20

Other:
Small business corporation s12E(4):
- CC or private company
- All members/ shareholders natural persons
- Gross Income less than R20m (apportion for part years)
- No member/SH has interst or holding in ANY other company other than:

  • Listed company
  • Collective investment scheme in securities
  • Not more than 20% of (total receipts or accruals, not of a capital nature, plus capital gains) from investment income and rendering of a personal service
  • Not a personal service provider
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5
Q

s13: Industrial and Research Buildings

A

Requirements:

  • Buildings wholly or mainly used
  • In process of manufacture or similar process
  • Taxpayer incurs cost of erecting or purchasing the building

Allowance based on:
Cost

Rate:
Used: limit to 5%

Other:
Can claim on improvements
Not on land

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6
Q

s13quin: Commercial Buildings

A

Requirements:

  • Owned by the taxpayer
  • New and unused buildings
  • Wholly or mainly used in the production of income
  • Excluding residential accommodation

Allowance based on:
lower of
- Cost and MV

Rate:
5%

Other:
AQUIRED PART of a building without erecting/constructing it: 
- If part: 55% x 5% (sub-divided) 
- If improvement : 30% x 5%
- If erected themselves = 5%
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7
Q

s13sex: Residential Units

A

Requirements:

  • New and unused
  • Residential units (or improvements)
  • Owned by TP

At least 5 residential units situated in RSA

Allowance based on:
Lesser of
- Actual cost
- Arms length cash cost (mv)

No deduction if ANY of the cost is deducted under any other section.
Total deductions cannot exceed cost.

Rate:
5%
Additional 5% if low cost

Other:
Low cost residential units
- Cost of apartment cannot exceed R350 000
- Cost of building not exceed R300 000
If rental charged, cant exceed 1% per month of cost.
“cost” increased by 10% each year after 1st brought into use
Cost of building increased by proportionate share of cost of land and bulk infrastructure

AQUIRED PART of a building without erecting/constructing it:

  • If part: 55% x 5%
  • If improvement : 30% x 5%
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8
Q

s12N: Deductions in respect of improvements not owned by taxpayer

A

Requirements:
The requirements for s 12N(1) :
1. The taxpayer effects an improvement
2. On the land or buildings.
3. In terms of a PPP or lease agreement for land and buildings owned by the government.
4. The taxpayer (lessee) must incur the expenditure and complete the improvement.
5. The taxpayer (lessee) must use or occupy the land or buildings for the production of income or derive income from it.

Allowance based on:
Can claim allowances on
-	s11D
-	s13
-	s13quin
-	s13sex
Can’t claim s11(g) leasehold improvements because treated as the owner

Rate:

Other:
s12N(3) - Does not apply if:

  • Carries on any banking, financial services or insurance business or
  • Grants the right of use to any other person (ie subleases)

s12N(2) - When the right of use or occupation terminates:
The taxpayer is deemed to have disposed of the improvements to the owner of the land or buildings
- On the later of the date when
o The right or use or occupation terminated or
o The actual use or occupation terminated

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