Chapter14 DAPM
Chapter 14 Depreciation Allowance (折舊免稅額) – Plant and Machinery
1. Learning Objectives
1.1 Identify assets which are plant or machinery.
1.2 Identify persons who can claim depreciation allowance.
1.3 Identify the type of expenditure that qualifies for the depreciation allowance.
1.4 Compute depreciation allowance under the pooling system.
1.5 Compute depreciation allowance under the non-pooling system.
1.6 Calculate the balancing adjustment that arises when an asset is disposed of.
1.7 Identify prescribed fixed assets.
1.8 Explain the tax treatment of prescribed fixed assets.
2. Definition of Plant (設備, 裝置) and Machinery
2.1 Plant and machinery is not defined in the IRO, so the words must be given their ordinary meaning. There have been numerous cases before the UK courts on the definition of plant.
(A) Functional test
2.2
DEFINITION
In Yarmouth v France (1887) 19 QDB 647, plant was defined as the apparatus (器械, 設備, 儀器) used by a businessman for carrying out his business – not his stock in trade, but all goods and chattels (動產) fixed or movable, live or dead, which he keeps for permanent employment in his business.
2.3 Many tax cases involve the distinction between plant and building. It has been said that plant performs an active function, while the function of a building is passive.
2.4
EXAMPLE 1
In CIR v Barclay, Curle & Co Ltd (1969) 45 TC 221, a dry dock was held to be plant, not a building structure. The dry dock held ships up for repair and was similar to a tool of a trader.
2.5
EXAMPLE 2
The active and passive function test was also illustrated in CIR v Scottish & Newcastle Breweries Ltd (1982) 55 TC 252. In this case, decorations, electric light fittings of hotels, were held to be plant as they carried out the function of creating atmosphere.
(B) Setting (安裝) test
2.6
EXAMPLE 3
In J Lyons & Co Ltd v AG (1944) 1 All ER 477, a distinction was made between the setting in which business was carried out and the apparatus with which the
1. Learning Objectives
1.1 Identify assets which are plant or machinery.
1.2 Identify persons who can claim depreciation allowance.
1.3 Identify the type of expenditure that qualifies for the depreciation allowance.
1.4 Compute depreciation allowance under the pooling system.
1.5 Compute depreciation allowance under the non-pooling system.
1.6 Calculate the balancing adjustment that arises when an asset is disposed of.
1.7 Identify prescribed fixed assets.
1.8 Explain the tax treatment of prescribed fixed assets.
2. Definition of Plant (設備, 裝置) and Machinery
2.1 Plant and machinery is not defined in the IRO, so the words must be given their ordinary meaning. There have been numerous cases before the UK courts on the definition of plant.
(A) Functional test
2.2
DEFINITION
In Yarmouth v France (1887) 19 QDB 647, plant was defined as the apparatus (器械, 設備, 儀器) used by a businessman for carrying out his business – not his stock in trade, but all goods and chattels (動產) fixed or movable, live or dead, which he keeps for permanent employment in his business.
2.3 Many tax cases involve the distinction between plant and building. It has been said that plant performs an active function, while the function of a building is passive.
2.4
EXAMPLE 1
In CIR v Barclay, Curle & Co Ltd (1969) 45 TC 221, a dry dock was held to be plant, not a building structure. The dry dock held ships up for repair and was similar to a tool of a trader.
2.5
EXAMPLE 2
The active and passive function test was also illustrated in CIR v Scottish & Newcastle Breweries Ltd (1982) 55 TC 252. In this case, decorations, electric light fittings of hotels, were held to be plant as they carried out the function of creating atmosphere.
(B) Setting (安裝) test
2.6
EXAMPLE 3
In J Lyons & Co Ltd v AG (1944) 1 All ER 477, a distinction was made between the setting in which business was carried out and the apparatus with which the