Industrial Building Allowance

1. 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

2. Industrial Building Allowance ….cont • 7) 75% rule • 8) Purchased industrial building • 9) Part of building used as IB • 10) Initial allowance • 11) Annual allowance • 12) Historical development • 13) Meaning of disposal

3. Industrial Building Allowance ….cont • 14) Disposal value • 15) Building constructed for government use

4. 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

5. 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

6. 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

7. 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

8. 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.

9. 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

10. 5 Qualifying building expenditure • architect’s fees • cost of preparing plans • cost of clearing the old site • cost of construction • Incidental expenditure • Cost of installing fittings • Legal charges, stamp duties

11. 6. Constructed buildings • QBE includes: a) cost of construction b) subsequent exp on construction, extension, alteration & renovation c) initial repairs

12. 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

13. 8.0 Purchased Industrial Building • W.e.f YA 2005, purchase price = QBE

14. 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 .

15. 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

16. Annual allowance(para 16, Sch 3) • Constructed building- AA 3% • Purchased building - AA 3%

17. Meaning of Disposal (para 48, Sch 3) • IB is disposed • sale,transfer,or assignment of interest • End of concession • End of leasehold • Demolition or destruction of the building • Building ceased to be used as IB

18. Rented Premise • If taxpayer rents & uses building as IB, QBE incurred on renovation cost is allowed.

19. 14. Disposal Value • Market value= Disposal value • If building is sold,transferred or assigned, DV a) MV or b) net proceed Whichever is lower

20. 14.2 Insurance compensation • Disposal Value is either market value or insurance compensation, which is the greater

21. 14.3 Demolished • If net cost of demolition is negative , it is added to residual value thus increasing balancing allowance

22. 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%