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Capital Allowance and Charges - Coggle Diagram
Capital Allowance and Charges
Qualifying criteria -is capital expenditure incurred on the provision of machinery or plant used for the purposes of the business
'Plant' and 'machinery' - Capital allowance is available provided the capital expenditure incurred falls within the ambit of 'plant' or 'machinery'
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Books as plant
- 'plant' in Yarmouth v France was wide enough to cover books used by barrister's in a legal firm.
~Floating restaurant is not plant
-if it can provide some usefulness and can be separately identified in the business.
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Moveable partitions as plant
- It was used to carry out the operations of shipping agents, that is so satisfy the fluctuating nature of the company's accommodation requirement by providing readily moveable partitions.
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Horse as plant
- Horses and carts used in the business of 'wharfinging' are plant.
Small items as plant- The meaning of 'plant' encompasses articles that are small, cheap, in large quantities and of relative short life.
Human is not plant- the taxpayar incurred medical expenses which had been claimed as a deduction from his profits on the ground of 'wear and tear provisions'.
Light fittings are not plant- that electric light fittings were not plants as they were not part of the apparatus used for carrying on the taxpayer's business.
Car park is plant- the company carries on the business s car park operator.
Golf course is not plant- the Court of Appeal asked to final adjudicate whether expenditure incurred on the provision of 'plant ' used for the purposes of golf course business.
Installation of plant or machinery- The cost of plant or machinery would qualify for capital allowance. In certain situations, expenditure may be incurred on preparing, cutting, tunneling or levelling land in order to prepare a site for the installation.
Initial Allowance- Capital allowance claim in any year comprises of initial and annual allowances.
~Eligibility of initial allowance
3 conditions
If an assets is acquired and disposed in the same year, initial allowance is given provided he is the owner and such assets is in use sometimes before the disposal.
~Mining, timber and construction business [Income Tax (Qualifying Plant Initial Allowance) Rules 1998. P.U.(A) 294/98]
~Public transport companies/ Natural gas refuelling
~Imported heavy machinery
~ Environment protecting equipment
~Assets bought and sold in the same year
Meaning of 'owner'
Meaning of 'in use'
Qualifying plant expenditure- is capital expenditure incurred on the provision of machinery or plant used for the purposes.
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Input tax
- For GST registrant buyer, the input tax can be deducted from the output tax charged on product or services provided.
Annual allowance- the name implies is an allowance given every year to the taxpayer so long as the assets is in use at the end of the basis period.
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The eligibility (para 15, Sch 3)
- annual allowance are given 3 of the following condition are fullfilled.
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Annual Allowance Rate [YA 2000 (current year basis) and subsequent years]
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Accelerated capital allowance (ACA)- Tun Razak Exchange (1.1.2014-31.12.2020)
Recycling of waste - company
Reinvestment in qualifying projects
Power quality equipment - company (w.e.f. YA 2005)
Agriculltural sector (w.e.f YA 2005)
Industrialised building system (w.e.f. YA 2006)
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Tun Razak Exchange (1.1.2014-31.12.2020)- initial allowance 20%,and annual allowance at 40%
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ACA on small value assets
Scope of small value assets
Residual expenditure (para 68)
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Cost of dismantling and removing the asset (Para 67C)
- is to be included as part of residual expenditure in computing the balancing adjustments.
Hire purchases transaction (para 46)
Qualifying expenditure for motor vehicles [para 2(2)]
~YA 2001 and its subsequent years
~ Cost component
~ Blocked input tax
Basis period
~Before commencement of business (para 55)
~ After commencement of business
~ Overlapping period
~Change of basis period
Temporary disuse (para 56 and 57)
Balancing allowance/ charges
Meaning of disposal
~General principle on disposal value (para 62,Sch 3)
~Sale proceeds not recovered
~Disposal by way of insurance compensation/ recoveries
~Disposal of motor vehicles
~Disposal with other assets
Assets owned for less than 2 years
Dual purpose case
Used plant & machinery
Unutilised capital allowance available for carry forward
Replacement assets
Assets held for sale
~ Disposal value
~ Residual expenditure
GST adjustment
Tax administration