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Depreciation allowance - plant and machinery
Plant
and machinery used in the production of assessable profits attract
depreciation allowances --- a deduction from assessable profits.
Theoretically the allowances can also be claimed under Salaries Tax but this
rarely occurs in practice.
Plant
and machinery used for scientific research are fully deductible under
Section 16B of Inland Revenue Ordinance. Besides, plant and machinery for manufacturing process and computer hardware and software used for a
trade are wholly deductible under Section 16G. In these situations, the traders
should claim full deduction under Section 16B rather than depreciation allowances.
Before
1980/1981, the allowances are separately computed for each asset. This
system is generally called “the old system”. Obviously, this system gives
a lot of computation work if the taxpayer has many assets. Now this method
only applies for
assets which are not wholly used for the trade
or for assets purchased on
hire-purchase.
Since
1980/81, the allowances are computed for each pool of assets with the same
rate of annual allowance. This system is called “the pooling system”.
This system saves a lot of computation work because it dispenses
separate record and computation for each asset.
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