Capital Allowances

Question 1

Capital Allowances: Groups of assets:

Answer 1

1. Machinery, plant, implements, utensils
2. Research & Development
3. Buildings
4. Recoupements
5. SBC’s

Question 2

S12E: Small Business Corporations: Conditions and allowances:

Answer 2

CC or private company
Natural persons as members or shareholders
Gross income < R14mil
No shares held in any other company
< 20% is derived from investment income
Not a personal service provider

1. Plant & machinery - used for trade after 1 April 2001:
   100%. Allowance (new or second hand!)
2. Relocation costs: 100% in that year
3. Non-manufacturing assets: 50 / 30 / 20

Question 3

Recoupements: Sections:

Answer 3

S8(4)(a) General recoupements
S11(o) Sale of assets at a loss
S8(4) Deferring recoupements

Question 4

S8(4)(eA - eE):

Answer 4

eA: More than 1 asset replaces old asset = apportion!
eB: Depreciable asset = portion deferred is added to income each year
eC: Any portion not yet included must be included when asset is disposed of
eD: If TP ceases to use asset in trade, include outstanding portion
eE: Failure to bring new asset into use within prescribed time:
Include deferred recoupment
Interest must be calculated!

Question 5

S8(4)(e): General recoupments:

Answer 5

65. Involuntary disposal: Law, theft, destruction, replacement
66. Asset was subject to capital allowance and replacement asset was brought into use within 18 months

Question 6

Buildings: Relevant sections:

Answer 6

S13: Building allowances:
S13(sex): Residential units
S13(quat): Urban development allowance
S13(quin): Commercial building allowance

Question 7

S8(4)(a): General recoupements: Framework:

Answer 7

Specifically included in gross income
Step:
1. Calculate tax value = cost - capital allowances
2. Calculate recoupment / loss = selling price - tax value

Question 8

S13(quin): Commercial buildings:

Answer 8

1. Taxpayer owns new and unused building
2. Used in a trade
3. Excludes residential accommodation (5% per year)
4. Acquired after October 2008
   55% if acquired
   30% if improvement acquired