Flashcards in Capital Allowances And Recoupments Deck (23):
S11cA restraint of trade payments
Amount actually incurred in carrying on a trade for payment for restraint of trade, to extent it will be income of that person.
Over period or one third. Lesser. Not apportion for part of year
S11gC intellectual property
Deduction of 5% for patent and copy right and 10% for a design.
If less than 5000 claim in full. Allowed year brought in use
S11i bad debts
Due debts which have become bad and which was included in income.
Ceased active recovery and written out of books.
Cannot claim for debt given to employee as it was never income.
Recovered amount will be recouped
S11j doubtful debt
Only if would have been allowed if had gone bad. Add back previous years allowance.
S11l contributions by employer to provident, pension and benefit funds
If lump sum, may allow annual deductions
S11lA shares issued in terms of s8B
Allow deduction if shares issued for broad based share scheme to value of mv of shares, less consideration paid by employees, limited to R10000 per employee per year. Carried unalloyed portion forward.
S11m annuities paid to former employees on retirement
Deduct in full if paid to employee retired due to old age or sickness, dependent so of employees if dependent so was dependent on that employee prior to death. Former partners
S11 nA and nB refunds of salary and restraint of trade
Amount refunded for services rendered by employee and was included in his income
S11x other deductions
S11 includes all deductions from s5-37H of the act. Thus that section creates the allowance and s11x brings it into income.
Expenditure actually incurred during year on property or machinery producing income or used for trade.
Materials need not be the same as replaced. Repair is not an improvement. The intention of the tax payer should be to restore the asset to its original condition.
S11 e wear and tear allowance
Don't have to have cost as act use term value.
No allowance for assets of permanent nature.
Apportion for part of the year. Include moving cost, over remainder of life. If change of use occur or becomes trade asset, allowance will be as if allowance from purchase of asset.
If unquantifiable cost, 24M applies and allowance will be allowed in year quantified together with previous allowances of years.
Installment credit agreement, seller legally owns the asset but cannot claim 11e, buyer can.
Assets must be brought into use
Allowance granted to lessor is based on cost less any residual value.
Lessor must write of asset over longer of lease or period set out.
If lessee contributes to cost, this amount must decrease amount lessor can claim allowance on if not included in income of lessor.
If change from diminishing value to straight line method, when change, calculate wear and tear as tax value over remaining useful life.
Small assets, functions on own not part of set, R7000 written off in full.
Can elect 11e rather than 12E, for example if less than R7000.
Reduce wear and tear proportionally if used partly for exempt tax purposes.
Items affixed to ground are permanent in nature, if fixed to building it will lose its nature and become permanent, thus no wear and tear.
S11o allowances in respect of disposal of assets
Depreciable asset is disposed of, 11e,12C,12E
Deduction only if disposed of not held. Not for assets which has a useful life of more than 10 years.
Cost( actual cast plus moving less recoupments) less sum of allowances and proceeds
Not allowed if sold to connected person, never used, not in current year,acquired asset for no consideration.
Use is treated as a deemed allowance even if amount was not allowed.
S20B limits this allowance. Only claim if no amount outstanding. Claim to extent proceeds received.
S12C deductions in respect of assets used by manufacturers
New or used. Brought into use for the first time. Lessor can claim if lessee uses asset for manufacturing and income is taxable (not if used in another country or exempt) or operating lease. No apportionment for part of year.
Must be owned. Can include assets of permanent nature.
Cost will exclude amount not quantifiable.
Deemed to have claimed allowance when determining period when become resident or asset now used for trade.
New or unused plant gets 40 20 20 20 write off. Second hand would be 20 for five years.
Process of manufacturing
Complete process, continuous without break. Change of material to end product.thus undergo process. Process must contribute to end product. As long as the machine was used in process it will qualify.
S12E small business corporations
100% new and unused manufacturing plant and machinery.
50,30,20 other assets which could have gotten 11e.
Used in process of manufacturing.
No apportionment for part of year.
If non manufacturing assets, claim 50 30 20.
Can choose 11e rather.
S13 deductions for building used in manufacturing
5% on cost and improvements. Lessor can claim if lessee uses it for manufacturing.
Can claim even if not own land as long as tax payer incurred the cost of the building. Used wholly to mainly for manufacturing, thus more than half.
Can be purchased if previous owner used for manufacturing or it is new, can claim on cost to purchaser. Not claim on land.
Claim on leasehold improvements only if spend more than agreed amount.
Recoupment may be set of against cost of replacement building, allowance on new building will be net of recoupment set off.
S13quin commercial buildings
5% on new and spun used buildings owned and used wholly or mainly in year for purpose of predicting income in course of trade. Can let it. Based on lower of cost and mv. Not apportioned for year.
If acquires part: 55%x5% of cost
Acquires an improvement 30%x5% of cost at arms length.
Improvement is a new and unused building, even if rest of building not new and unused.
S13sex deduction for certain residential units
5% on new and unused residential units or improvements, is SA and used solely for trade. Tax payer must at least own five in SA.
Extra 5% for low cost units.
Not apportioned. Exclude hotels.
On lesser of actual cost or arms length mv.
Buys unit of part of building or improvement. 55% or 30% of cost.
S13sept deductions in respect of low cost residential units on loan account
Sell to employee, get deduction of 10% of amount owing to him at year end for ten years.
Not allowed if have to sell back at cost, only allowed if have to sell back on termination of employment. Employee should not pay interest or buy for more than cost.
If employee repays part of loan, tax payer deemed to recoup lesser of repayment or amount deducted in current and previous years.
S12N deductions in respect of improvement on property not owned by tax payer
Lessee can claim allowance (not under 11e) as if owned land and buildings. Deemed owner of improvements for eighth schedule.
In terms of public private partnership or land and buildings owned by government.
Tax payer incur expenditure and completes improvements. Must use it for production of income.
Deemed disposal on earlier of right of use terminated or actual use terminated. Can renew right. Cannot sub lease unless of same group or repair still borne by tax payer as well as risk of destruction. Not apply to financial institutions.
S8(4)a general recoupment
Sale of capital asset, difference between selling price and tax value up to cost is recouped
If debt reduced of allowance asset held, first reduce cost of asset and rest is s8(4)a recoupment.
S8(4)e recoupment deferment
Set of recoupment against cost of new replacement asset. This will occur if para 65/66 of eighth schedule was selected, involuntary disposal, or investment in replacement depreciable asset where capital gain is deferred. Apportion amount if more than one asset acquired.
Deferred recoupment must be added to income in proportion of wear and tear. If ceases to use in trade or sells, remaining recoupment added to income. Full proceeds must be invested