Partial from a set of Corporate Income Tax Computation (ITC) (or either an individual with business income who going to claim for their capital allowance), Capital Allowance Schedulers Analysis would be a large portion for most of the ITC with tangible assets. Here I going to standardize and analysis the procedures steps by steps to be apply on your Capital Allowance (CA) Schedulers.
Understanding on each particular for CA Schedulers:-
A. Pages may appear for CA Schedulers:
i. [FA] FIXED ASSETS LISTING - ADDITIONS/DISPOSALS
ii. [HP2] SCHEDULE OF HIRE PURCHASE PAYMENTS
iii. [CA3] COMPUTATION OF INDUSTRIAL BUILDING ALLOWANCE/ CAPITAL ALLOWANCE - PURCHASED ASSETS
iv. [HPCA4]COMPUTATION OF CAPITAL ALLOWANCE - HIRE-PURCHASE ASSETS
v. [BABC] WRITTEN OFF/ DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT - BALANCING CHARGE AND ALLOWANCE
From the above is the analysis of completed ITC arrangement, we may stating the explanation from (i) to (iii) &(v) , then Hire Purchase from (ii) to (iv).
From i.[FA] - FIXED ASSETS LISTING - ADDITIONS/DISPOSALS
It would appear almost the particulars in the notes for Plant, Property and Equipment in the Financial Statement Notes (mostly note 3 in A/c or note 4 A/c) – Cost of assets
Which it would shows:-
What we can saw from this [FA] listing is that the company acquire a computer cost to RM2,010 during the financial year 2010 (says), where the computer may be listed under “Office Equipment” from the client’s Asset Listing or even an audited financial statement. To be act in good fair, we would still claim the office equipment (computer) as ITC for 20% Initial Allowance (IA) & 80% Annual Allowance (AA) for the Year of Assessment (YA) 2010 regardless whether they do disclosed in their financial statement.
Steps to compound for [FA]:-
1. 1. Check the closing balance of previous year ITC (says YA2009 for this eg.) and match up with the current year financial statement (audited report would be preferable) opening balance.
- This to be done because there is sometimes auditors may reclassifying the assets into another categories like transferred “Property in process” into “Land and building” without notification or disclosure but showing with different balance from c/d to b/d
1. 2. Matching the total figure to be acquired (and also disposal) during the year (says RM2,010 in this eg.) to ensure your closing balance could match up to the audited financial statements.
- Says if there is reclassifying of assets from the starting balance, you can choose to bring in the previous year ITC (2009) closing balance and make the reclassifying amount to be disclosing in your ITC 2010.
- Says auditor found out an amount of RM 100,000 in Furniture and fitting should be reclassified in Office Equipment, but they do only adjust the opening balance in the financial statement with no other notification, you can make the disclosure only in your ITC as :-
From here we may understand that the Fixed Asset Listing become the primary indicator to justifying the qualifying expenditure to be allowed to claim for capital allowance instead of Client’s Asset Listing or Audited Financial Statement.
From iii. [CA3] COMPUTATION OF INDUSTRIAL BUILDING ALLOWANCE/ CAPITAL ALLOWANCE - PURCHASED ASSETS
[CA3] view :
[Note: Please Click to Enlarge]
We can divide the schedule into 3 parts,
C1. Capital allowance balance brought forward
C2. Movement of assets during the year
C3. Calculation of Capital Allowance claim for the YA
Items (sources) we may need is
1. Previous year tax computation(for CA carrying balance purpose)
2. Audited financial statement (for matching the total ups amount of asset holdings)
3. Client’s assets listing (to know details of each asset, the date of purchase, purchase price, type of asset)
From the sources above,
[C1] – Copy and special paste all the Tax Written Down Value (Tax WDV) for each particular item, total amount for Tax WDV b/f must be equal to Tax WDV c/f from previous year. Says RM45,000 in this case. For new incorporate company without fixed asset before or domain previously, no Tax WDV to be carrying, means Tax WDV b/d = 0 is just fine.
[C2] - The new acquired assets during the year putting at the “Additions” column say Computer RM2010 acquired during the year in this case.
[C3] – Take calculates the Capital allowance claim for each asset during the year. Check on each asset the Initial Allowance (I.A.) & Annual Allowance (A.A.) for the year such as Accelerate Capital Allowance else normal rate to be claim. [Note: check on each item and condition from section to budget whether eligible to claim a higher rate for the YA, says Computer for YA2010 is I.A. 20%, A.A. 80%, but under certain condition (says) person has been granted any incentive under the Promotion of Investments Act 1986[Act 327], normal rate (20%, 40%) of computer would be claim according to PU(A)358 ]
For the rest of the column, formula on each introduce as below for your reference:-
1. Sub-Total = Tax WDV + Additions – Disposal @ Tax WDV
2. Cost =Cost b/f + Additions – Disposal @ Cost
3. Tax WDV c/f = Sub-Total – Initial Allowance – Annual Allowance
4. Rate of Allowance – Few sources is appreciable you may refer to :