Week 9 - Capital Allowances

Question 1

moveable property allowances?

Answer 1

s11d - repairs
s12C - manufacturing and research
s11e - wear and tear
s8(4)(a) - recoupment
s11(o) - scrapping allowance

Question 2

immoveable property allowances?

Answer 2

s11d - repairs
s13(1) - industrial and research buildings
s13quin - commercial buildings
s8(4)(a) - recoupment

Question 3

property used directly in manufacturing?

Answer 3

s12C and s13(1)

Question 4

only allowance which is apportioned?

Answer 4

s11e

Question 5

s11d definition?

Answer 5

expenditure actually incurred during the YOA on repairs of property:
- occupied/used for trade
- in respect of inc which is receivable

Question 6

requirements for s11d from case law?

Answer 6

• must be damage
• restoring a subsidiary part of a whole
• using a different material does not in itself alter the character of what is essentially a repair
• must prove existing asset became defective. restoring to income earning capacity is not repair (if its not working as effectively. must be defective)

Question 7

intention for s11d?

Answer 7

• must be to REPAIR, not to improve
• must be to part of the asset
• replacing broken asset is not repair
• restoring is not repair

Question 8

requirements of s11e?

Answer 8

• moveable
• owned not leased
• used for the purposes of trade

Question 9

what is s11e allowance claimed on?

Answer 9

• lesser of cost and MV
• use MV for free stuff, no cost needs to be incurred

Question 10

rate for s11e?

Answer 10

will be given, based on Binding General Rule no7

Question 11

apportionment in s11e?

Answer 11

yes, for time and for trade
(for part of year used and portion used for trade)

Question 12

when is allowance claimed?

Answer 12

from the date the asset is brought into use

Question 13

special rules in s11e?

Answer 13

• small assets
• permanent nature
• foundations / supporting structures
• moving expenses

Question 14

small assets in s11e?

Answer 14

• can function in its own right
• doesn’t form part of a set
• cost less than R7000
• can be fully written off at cost in YOA it was brought into trade

Question 15

permanent nature in s11e?

Answer 15

no deduction, except for foundations / supporting structures

Question 16

foundations / supporting structures in s11e?

Answer 16

must: (to be deductible)
- be designed for an asset which qualifies for s11e
- must have same EUL as qualifying asset or EUL of structure is ltd to EUL of qualifying asset

Question 17

moving expenses in s11e?

Answer 17

• must be written off over the remaining EUL of the asset
• if item already fully written off, moving costs can be fully claimed in YOA incurred

Question 18

cost vs lower of MV and cost?

Answer 18

lower of MV and cost?
- 12C, 13quin, 11e

cost?
- 13(1)

Question 19

s12C requirements?

Answer 19

• owned not leased
• brought into use for first time into trade; can be secondhand
• for trade
• used directly in manufacture

Question 20

what is 12C claimed on?

Answer 20

lesser of cost and MV
no cost = no deduction

Question 21

rate for 12C?

Answer 21

• new and unused = 40% then 20%
• secondhand = 20% in all 5

Question 22

special rules in 12C?

Answer 22

• foundations / supporting structures
• moving expenses
  (both are same as 11e rules)

Question 23

s13(1) requirements?

Answer 23

• immoveable only
• wholly or mainly for manufacture (50% +)
• where taxpayer incurs a cost of erecting building or purchasing new building

Question 24

rates for used buildings in s13(1)?

Answer 24

• if previous owner no allowance, you also no allowance
• allowance based on cost to most recent purchaser (not og cost to seller)
• new owner inherits old owner’s allowance rate, limited to 5%

Question 25

rate for new s13(1)?

Answer 25

5%

Question 26

special rules for s13(1)?

Answer 26

- improvements - land - recoupment - clearing/levelling costs

Question 27

improvements in s13(1)?

Answer 27

has to make the asset better in terms of what it can do as a process of manufacture. treated as a separate asset that gets a 5% allowance

Question 28

land in s13(1)?

Answer 28

no allowances for land

Question 29

clearing / levelling costs in s13(1)?

Answer 29

not included in cost of building and not qualify for allowance

Question 30

recoupment for s13(1)?

Answer 30

- if taxpayer sells a s13(1) qualifying building and replaces it with another within 12 months from sale of initial building, the recoupment from sale will not be included into taxable income in year of purchase. it will be deferred and set off against cost of new building.

Question 31

requirements for s13quin?

Answer 31

- new and unused - owned - used wholly or mainly during YOA for purposes of producing income in course of taxpayer's trade

Question 32

not allowed for s13quin?

Answer 32

- cannot produce exempt income - excludes provision of residential accommodation

Question 33

rate for s13quin?

Answer 33

5%

Question 34

special rules for s13quin?

Answer 34

- improvements - purchasing part of building without erecting/constructing that part - purchasing part of an improvement without erecting/constructing that part

Question 35

improvements for s13quin?

Answer 35

[same as 13(1)] has to make the asset better in terms of what it can do as a process of manufacture. treated as a separate asset that gets a 5% allowance

Question 36

purchasing part of building without erecting/constructing that part for 13quin?

Answer 36

cost = 55% of cost lower of cost and MV 5% allowance over 20 years

Question 37

purchasing part of an improvement without erecting/constructing that part for 13quin?

Answer 37

cost = 30% of cost lower of cost and MV 5% allowance over 20 years

Question 38

what are the req for s13sex?

Answer 38

- owned - used solely for trade - within SA - taxpayer owns at least 5

Question 39

what are the rates for s13sex?

Answer 39

5% for normal 10% for low-cost

Question 40

what is the cost for s13sex?

Answer 40

lower of cost and MV

Question 41

what are the special rules for s13sex?

Answer 41

55% for part unit acquired 30% for improvement acquired

Question 42

when is a res unit considered low-cost?

Answer 42

- apartment costing less than 350k - building costing less than 300k - owner doesn't charge rent that is more than 1%

Question 43

what allowances does SBC get for a manufacturing asset?

Answer 43

100% in year 1

Question 44

what allowance does SBC get for trade asset?

Answer 44

50,30,20 or s11(e), whichever provides higher allowances