CAPITAL ALLOWANCES

• ACCOUNTING DEPRECIATION
• TAX DEPRECIATION
Conditions to claim Capital allowances:
• THE CAPITAL EXPENDITURE MUST HAVE BEEN INCURRED IN PROVIDING THE PLANT
OR MACHINERY;
• THE PERSON INCURRING THE CAPITAL EXPENDITURE MUST BE CARRYING ON A
BUSINESS;
• THE PERSON MUST BE THE OWNER OF THE ASSET AT THE END OF THE BASIS PERIOD;
AND
Capital allowances (ITA 1967):
• QUALIFYING EXPENDITURE UNDER SCHEDULE 3 ITA
• QUALIFYING PLANT AND MACHINERY EXPENDITURE (PARA 2)
• QUALIFYING BUILDINGS EXPENDITURE (PARA 3 -6)
• QUALIFYING AGRICULTURE EXPENDITURE (PARA 7)
• QUALIFYING FOREST EXPENDITURE (PARA 8)
• QUALIFYING RENOVATION OR REFURBISHMENT EXPENDITURE (PARA 8A-8B)
• (SCH. 3) - AA
Capital allowances (ITA 1967):
• INITIAL ALLOWANCE (PARA 10-12)
• ANNUAL ALLOWANCE (PARA 15-17)
• SMALL VALUE ASSETS (PARA 19A)
• AGRICULTURE ALLOWANCE (PARA 20-17)
• FOREST ALLOWANCE (PARA 28-32)
• RENOVATION & REFURBISHMENT ALLOWANCE (PARA 32A-32B)
• BALANCING ALLOWANCES AND BALANCING CHARGES (PARA 33-35)
Capital allowances (ITA 1967):
• QUALIFYING EXPENDITURE: LICENSED PRIVATE HOSPITAL, MATERNITY HOME AND
NURSING HOME (PARA 37A)
• QUALIFYING EXPENDITURE: BUILDING USED FOR RESEARCH (PARA 37B)
• QUALIFYING EXPENDITURE: BUILDING USED FOR WAREHOUSE (PARA 37C)
• QUALIFYING EXPENDITURE: MACHINERY OR PLANT USED FOR RESEARCH AND
DEVELOPMENT (PARA 37D)
• QUALIFYING EXPENDITURE: BUILDING USED FOR APPROVED SERVICE PROJECT
(PARA 37E)
• QUALIFYING EXPENDITURE: BUILDING USED FOR HOTEL (PARA 37F)
• QUALIFYING EXPENDITURE: AIRPORT (PARA 37G)
• QUALIFYING EXPENDITURE: MOTOR RACING CIRCUIT (PARA 37H)
PLANT & MACHINERY:
• ITA DOES NOT PROVIDE DEFINITION FOR PLANT & MACHINERY
• NORMAL DEFINITION:
• An engine or machine run by either using gas, electric or turbine.
• Machinery operated manually or other force
• Non-moveable, metal tanks
• Moveable, Trains, planes
• Electrical appliances, x-ray machine
• Fixtures and fittings
• Computers including software
Capital Expenditure
(held to be Plant)
1. DECOR, LIGHT FITTINGS, PICTURES
• IR Comms v Scottish Newcastle Breweries Ltd
2. DECORATIVE SCREENS IN WINDOWS TO ATTRACT CUSTOMERS
• Leeds Permanent Building Society v Proctor
3. HORSE
• Yarmouth v France
4. KNIVES USED IN THE MANUFACTURE OF SHOES
• Hinton v Maden & Ireland Ltd
5. MOVABLE OFFICE PARTITIONS-
• Jarrold v John Good & Sons Ltd
Capital Expenditure
(held to be Plant)
6. BARRISTER’S LAW BOOKS AND LAW REPORTS
• Munby v Furlong
7. SWIMMING POOLS
• Cooke v Beach Stationers Caravan Ltd
8. CONCRETE DRY DOCK
• CIR v Barclays, Curle &Co.Ltd
9. WELLS
• CIT v Warner Hindustan Ltd
10. DRIVING SCHOOL FOR MOTOR VEHICLE
• Ketua Pengarah Hasil Dalam Negeri v MSDC
Capital Expenditure
(not held to be Plant)
1. CANOPY OVER GARAGE SERVICE AREA
- Dixson v Fitch’s Garrage Ltd

2. ELECTRIC LAMP & FITTING IN A SHOP

- J Lyson & Co. Ltd v Attorney General

3. FALSE CEILING
- Hampton v Forres Autogrill Ltd

4. FLOATING RESTAURANT
- Benson v Yard Arm Club Ltd

5. GYMNASIUM
- St. John’s School v Ward
Capital Expenditure
(not held to be Plant)
6. AMERICAN FOOTBALL PITCH
- Anchor International Limited v CIR

7. STAND AT FOOTBALL CLUB

- Brown c Burnley Football & Athletic Co. Ltd

8. WALLPAPER & WATER STORAGE TANK

- Rose & Co. Ltd v Campbell
Plant and Machinery which is Disused

• No allowance is allowed
• Must be used in the business
– Case law – DRH [(1951) FB VII (4)]
(A doctor claimed an allowance for wear and tear of his
car but was disallowed. He wan an employee & not
carrying business)
Plant and Machinery owned Less Than 2
Years
Para 71

• Allowance would not be allowed

• If allowances have been claimed, a balancing charge equal to the

allowance claimed will be charged to the claimant in the YA of the
basis year
Hire Purchase Agreements
PARA 46 Schedule 3

• The hirer is deemed to be the owner of the assets

• Entitled to claim allowance related to the capital
portion made in the relevant period
 A – Daphne vs Shaw
 B – Thomas vs Reynolds
 C – KPHDN vs Tropiland Sdn Bhd
 D – KPHDN vs Oka Concrete Industries Ltd
 E – DGIR vs Teo Tuan Kwee
 F – SMT Sdn Bhd vs DGIR
 G – Bourne vs Norwich Crematorium Ltd
 H – CIR vs Lambhill Ironworks Ltd