chapter 2a industrial building allowances
TRANSCRIPT
Industrial Building
Allowance
1) Introduction - QBE
2) Industrial buildings
3) Factory
4) Circumstances where buildings are
treated as IB
5) Qualifying building expenditure
6) Constructed building
7) 75% rule
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Industrial Building
Allowance ….cont
8) Purchased industrial building
9) Part of building used as IB
10) Initial allowance
11) Annual allowance
12) Historical development
13) Meaning of disposal
14) Disposal value
15) Building constructed for govt. use2
1) Introduction- QBE
Para 3 Sch 3
Capital expenditure incurred on the construction or purchased of a building which is used at any time after its construction or purchase, as an industrial building
Taxpayer can claim IBA
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2) Industrial buildings
(para63,Sch 3)
Definition:
i) factory
ii) a dock, wharf, jetty, or other similar buildings
iii) a warehouse let to public
iv) building used in the utility business
v) buildings used in the working of mines or farms
vi) mill, workshop, in connection with the working of mine
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3) Factory..para 64
i) a building consisting of a mill, a
workshop, or other building for the
housing of machinery or plant used in
the manufacture of any product or the
subjection of goods or materials to any
process or the generating of power
used for that purpose of that
manufacture or process, and
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3) Factory..para 64
ii) A building used incidental to the
manufacturing business
iii) A building used for the storage of raw
materials, fuels,stores, etc used in the
manufacture processes or for storing
of completed manufactured goods
materials
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4.0 Other buildings treated
as Industrial Building
1) staff welfare
2) living accommodation for employees
-farm, construction of employees quarters, manufacturing, hotel or tourism project, approved service project, child care facilities
3) school/educational institution or technical training
4) private hospital, maternity home, nursing home
5) Research
6) Storage of goods for export.7
4.0 Other buildings treated
as Industrial Building
7)Public road & ancillary structures
8) Building used in approaved science project
9) Building used as hotel
10) Airport
11) Motor racing circuit
12) Old folks care centre
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5 Qualifying building
expenditure
1) architect’s fees
2) cost of preparing plans
3) cost of clearing the old site
4) cost of construction
5) Incidental expenditure
6) Cost of installing fittings
7) Legal charges, stamp duties
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6. Constructed buildings
QBE includes:
a) cost of construction
b) subsequent exp on construction,
extension, alteration & renovation
c) initial repairs
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7. 75 % rule (para 67)
Cost of preparing site for P&M
P & M cost P
Add: Cost of preparing, cutting,
leveling land L
E
If L >75% of E, then E is the QBE
If L < 75% of E, then P is the QBE
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8.0 Purchased Industrial
Building
W.e.f YA 2005, purchase price = QBE
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Part of building used as IB
When part of building not used as IB, the
whole building is treated as IB if the cost of
construction of the part of building not used
as IB is less than 10% of the whole building
If the cost of construction of the non-
qualifying part exceed 10% of the whole
building , then IBA is given in proportion to
part of building used as IB .
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10 Initial allowance
(para 12,13)
10 % IA is given if
1) person incur QBE on the
construction or purchase
2) building used as IB
3) person owned that building at the
end of the basis period
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11. Annual allowance
(para 16, Sch 3)
1. Constructed building- AA 3%
2. Purchased building - AA 3%
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Meaning of Disposal
(para 48, Sch 3)
IB is disposed
1) sale,transfer,or assignment of interest
2) End of concession
3) End of leasehold
4) Demolition or destruction of the building
5) Building ceased to be used as IB
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Rented Premise
If taxpayer rents & uses building as IB,
QBE incurred on renovation cost is
allowed.
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14. Disposal Value
Market value= Disposal value
If building is sold,transferred or
assigned, DV
a) MV or
b) net proceed
Whichever is lower
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14.2 Insurance compensation
Disposal Value is either market value or
insurance compensation, which is the
greater
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14.3 Demolished
If net cost of demolition is negative , it
is added to residual value thus
increasing balancing allowance
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15. Building constructed for
government use
W.e.f YA 2000, IBA will be given if the
building is constructed based on a
build-lease transfer.
IBA- IA 10%
AA 6%
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