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