Unit 11 - THE UNIVERSITY OF HONG KONG SCHOOL OF BUSINESS...

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U11_DA_Building_0910_students 1 THE UNIVERSITY OF HONG KONG SCHOOL OF BUSINESS BUSI 0018 – Hong Kong Taxation Unit 11 – Depreciation Allowance: Building Coverage 1 Introduction 2 Qualifying trades for industrial building allowance (IBA) 3 Qualifying buildings or structures 4 Qualifying person for IBA 5 Qualifying expenditure 6 Depreciation allowances for industrial buildings - Initial allowance (I.A.) - Annual allowance (A.A.) - Balancing charge (B.C.)/Balancing allowance (B.A.) 7 Sale of an unused industrial building 8 Sale of a used industrial building 9 Commercial buildings - Rebuilding allowance for years up to 1997/98 - Commercial building allowance from 1998/99 onwards 10 Balancing adjustment for building used as both industrial and commercial building Learning Objectives After completing this unit, you should be able to: distinguish between industrial building and commercial building identify who is entitled to industrial building allowances and commercial building allowances determine the qualifying expenditures compute the depreciation allowances of a used and unused industrial building determine the balancing adjustments compute the depreciation allowances of a commercial building 1 INTRODUCTION Two classes of depreciation allowances are available for buildings: - Industrial buildings allowances (IBA) - Rebuilding allowances (RBA) or commercial building allowances (CBA)
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U11_DA_Building_0910_students 2 2 QUALIFYING TRADES FOR IBA – s.40(1) An industrial building or structure is defined in s.40(1) as one being used for a qualifying trade Qualifying trades: - Trade carried on in a mill, factory, etc. - Trade of transport, tunnel, dock, water, gas, electricity undertaking, public telephonic/telegraphic service - Trade consists of the manufacture of goods or materials, or the subjection of goods or materials to any process - Trade of storage - Business of farming - For research and development related to any trade or business 3 QUALIFYING BUILDINGS OR STRUCTURES – s.40(1) Any building used for a qualifying trade Subject to exception, qualifying buildings exclude : - dwelling house (except for manual workers) - retail shop - showroom - hotel - office Exception: where capital expenditure on non-qualifying part is not more than 10% of expenditure on the whole building, whole building/structure treated as qualifying 4 QUALIFYING PERSON FOR IBA – s.18F, s.19E and s.34 Person carrying on a trade, profession or business, and the industrial building is used in the production of assessable profits Subject to exception, initial allowance is given to the person who incurred capital expenditure on the construction of building/structure Annual allowance (and balancing allowance/charge) are granted to (or charged on) the person who entitles to the "relevant interest" in relation to the qualifying expenditure "relevant interest" means the interest in a building or structure to which the person who incurred the expenditure was entitled when he incurred it
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U11_DA_Building_0910_students 3 5 QUALIFYING EXPENDITURE – s.40(1)
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This note was uploaded on 02/23/2012 for the course BUSI 0018 taught by Professor C.ng during the Spring '11 term at HKU.

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Unit 11 - THE UNIVERSITY OF HONG KONG SCHOOL OF BUSINESS...

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