Tax CAPITAL ALLOWANCES | Course Paper

CAPITAL ALLOWANCES 1

•Replaces depreciation

•Wear and tear that is caused by natural

processes of decay

•Calculated for a year of assessment

•Given only in respect of a business source and

the person who incurs the qualifying

expenditure is eligible to claim the allowances

•Capital allowances fall into 3 categories

•Initial allowance

•Annual allowance

•Balancing allowance

INTRODUCTION

CALCULATION OF TAXABLE INCOME

Business

1RM RM

Adjusted income

XXX

Add: Balancing

Charges

xx

XXX

Less:

Capital allowances

b/f from previous YA

xx

Capital allowances for the current year

xx

(xx)

Statutory income business 1

XXX

•Identify qualifying expenditure

•Calculate initial allowance, annual allowance

and accelerated allowances

•Calculate disposal of plant and machinery

LEARNING OBJECTIVES

LEARNING OBJECTIVE 1 Identify qualifying

expenditure

•Not defined by the Act.

•Must look at case law to determine whether

asset is machinery or plant

DEFINITION OF P & M

Only available if 4 conditions are fulfilled:

•The person incurring the capital expenditure must be

carrying on a business;

•The capital expenditure must have been incurred in

PERSONS ENTITLED TO CLAIM CAPITAL ALLOWANCES