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CapitalAllowances

Seminar 2 Group 4

Tan Chin Hou Chong Xue Ian

Lam Yi Yong Jonas Kwok

Chionh Zhi Yang Steffi Mun

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Question 1

Present a summary of the test ofplant, i.e. how to determinewhether an asset isplant for the purposes of a claim

of wear and tear allowances.

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What is a Plant?

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What is a Plant?

Not defined in the Act

Sixth Schedule of ITA only specifies the

number of years of working life accordedto certain assets for computing annualallowances if they are plant or machinery

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What is a Plant?

Apparatus with which a person carries ona trade, business or profession

Numerous decided cases have providedguidance on the meaning of plant

THREE (3) tests to be considered indeciding whether an item is plant:

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3 Tests

Is the item stock-in-trade?

Is the item used for carrying on the

business? (business use test)

Is the item the business premises or partof the business premises? (premisestest)

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ExpenditureIs it

stock-in-trade?

Business Use TestDoes it function asapparatus used for

carrying on activities inthe business?

Premises TestIs it business

premises or part ofbusiness premises?

NO

YES

NO

NOTPLANT

PLANT

YES

NO

YES

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Stock-in-trade?

An item which forms part of the stock-in-trade, i.e. purchased for resale, cannot

be considered to be plant

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Business Use Test

The asset must function as an apparatusused by the taxpayer in carrying on the

activities of the business Question of fact and degree

Nature of business

Purpose or function the item serves inbusiness

Dixon v Fitchs Garage Ltd (1975)

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Dixon v Fitchs Garage Ltd

Building of canopy over the petrol pumps

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Premises Test

The item must not be used as thepremises/part of the premises, or place

where the business is conducted Purpose-built structures need to pass the

test

CANNOTbe simply used for shelter(St

Johns School (Mountford and Knibbs) vWard)

CANNOT be used for the sole purposeof attracting customers(Benson v Yard

Arm Club Ltd)

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Premises Test

Exception: Plant-like structures

Some premises may qualify as plant if

such premises perform activeoperational functions(IRC v BarclayCurie & Co Ltd)

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Premises Test

Setting

Assets that are not part of the business premises butmerely form part of the setting in which business isconducted

will NOT qualify as plant Exception: May qualify as plant if they were also

part of the apparatus with which the trade wascarried on (Jarrold v John Good & Sons Ltd)

Dependent on nature of businessCIR v Scottish &Newcastle Breweries Ltd(the story about hotellights as ambience hence plant)

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Premises Test

In summary, factors to be considered to decide whetheran item is part of premises:

Does an item appear visually to retain a separateidentity?

The degree of permanence with which it has beenattached to the building?

To what extent is the structure complete without

it? To what extent is it intended to be permanent or is

it likely to be replaced within a short period

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THIS IS IT!BYE!

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Question 2

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Background Information

Bad Medicine (S) Pte Ltd

Pharmaceuticals Manufacturing Business

YA 2013 Year ended 30 June 2012

Improvement to Leasehold Premises account

Various items relating to the renovation of the building- $2,456,943

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Question

Evaluate all of the above advice andframe thebroad approach that you would take indetermining the appropriate claim/s to make.

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claim LIA on the entire sum 25% IA, and, if the building wasalready in use on 30 June 2012,

5% AA as well... Mr Phua

LIA15 years write-offclaimsection 19A(1) 3-year wear andtear allowances1-year write-

offPICautomationequipment Ms Cheong

detailed breakdown and description ofthe expenditure and make the mostappropriate and tax-efficient claimssection

14(1)(c) renewal deduction, section 14Qspecial deduction, wear and tear allowances

and LIA Mr Sangat

IBA claim Mr Seow

Advice

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CapitalAllowances (CA)

Wear & TearAllowances (WTA)

S19 Allowance

s19A Allowance

AcceleratedAllowance

s19A(1) 3-year

s19A(2) 1-year

Enhanced

Allowance

s19A(2A) & (2B)Productivity &

Innovation Credit(PIC)

Industrial BuildingAllowances (IBA)

LandIntensification

Allowances (LIA)

Deductions

s14(1)(c)

s14Q

Overview

Plant & Machinery (P&M)

Land & Building

Industrial BuildingAllowances (IBA)

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