Capital Allowances Flashcards
s11(e): Wear and Tear Allowance on moveable assets used for trade
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
s12C: Manufacturing and Research
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)
s12E: Small Business Corporations - s12E(1)
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
s12E: Small Business Corporations - S12E(1A)
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
s13: Industrial and Research Buildings
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
s13quin: Commercial Buildings
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%
s13sex: Residential Units
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%
s12N: Deductions in respect of improvements not owned by taxpayer
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
