Capital Allowances and Recoupments

Question 1

What is a capital allowance?

Question 2

What is a recoupment?

Question 3

What considerations must one account for when considering capital allowances?

Question 4

what considerations must one account for when considering recoupments?

Question 5

What are the tax implications when you make improvements to your leasehold beyond what you were told to do in terms of money and actual building?

Answer 5

section 13 maybe? of the ITA
- if the building is used for manufacturing, you can claim a 5% allowance every year on the extra cost you paid (idk if its apportioned)
- if it is not used for manufacutring, you cannot claim anything I think

• you will need to confirm this one

Question 6

What capital allowances are available for Patents?

Answer 6

Section 11(gC)
- they will be entitled to an allowance of 5% on the deemed expenditure

Question 7

How does Section 11(o) work?

Answer 7

• it is a scrapping allowance which allows you to write off the remaining wear and tear allowance as you dispose of the asset
• however the amount it lets you write off is if you are disposing it for a value less than the tax value, you can then write off the difference.
• you can also just opt to take the difference as a capital loss in that year of assessment and not apply section 11(o)
• however if the assets write off years exceed 10 years, then this section is not Available at all and you will be forced to treat it as a capital loss

Question 8

What is the relevance of section 24M?

Answer 8

• This section states that if you dispose of an asset while the value for which you disposed of it is not qualifiable in the current year of assessment, you will need to not include the amount received in that year but only in the year in which the value is quantifiable
• no more allowance will happen because the disposal has still happened

Question 9

How does Section 13 Quin Work?

Answer 9

• This Section explains that if you have a building that is MAINLY used for commercial purposes, then you can claim a 5% allowance per annum on the tax value of the building, non diminishing value.

Question 10

How Does Section 13 Sex work?

Answer 10

• If you are using a building for residential purposes, this section allows for you to deduct 5% of the tax value of the building per annum (the value doesn’t diminish overtime though). If the building is low cost (the rent charged per year is less than 1% of the market value of the building and the market value of the building is less R350,000 per unit) then you can claim an additional 5% allowance per year, therfore 10% in total.