Summary Capital allowance - CTA and ITC TAX4862

CAPITAL ALLOWANCES
What is a connected person, the act refers specifically to connected persons in section 1. If
an asset is sold to a connected person, no s11 (o) allowance will be allowed as a deduction.

Type of taxpayer Connected persons in relation to the taxpayer
Natural person (par(a) of  Any relative
definition)  A trust of which the natural person is a beneficiary

Trust other than a portfolio of a  Any beneficiary of a trust
collective investment scheme.  Any connected person in relation to a beneficiary
(par(b) of definition)


Connected person in relation to a  Any other person who is connected person in
trust (par(bA) of definition) relation to the trust

Members of a partnership or  Any other member
foreign partnerships (par(c) of  Any connected person in relation to an member of
definition) the partnership or foreign partnership


Company including a portfolio of  Any other companies in the same group of
a collective investment scheme companies, where a group companies consist of a
par(d)(i) – (vA) controlling group company that:
 Directly hold more than 50% of the equity
shares or voting rights in at least one
controlled group company and
 Directly or indirectly holds more than 50% of
the equity shares in or voting rights in each
controlled group company.
 Any person (excluding companies) that individually
or jointly with that person’s connected person holds
20% or more of a company equity shares or voting
rights.
 Any company that holds 20% or more of a equity
shares or voting rights (but only if non other
shareholder holds the majority of voting rights in the
company)
 Any other company, if the company is managed or
controlled by a connected person (or his connected
person)
 Any other company that would be part of the same
group of companies according to the definition of
group companies

Close corporation  Any member
 Any relative of the member or trust that is a
connected person in relation to a member
 Any other close corporation which is a connected
person to one of the members.

, Section Information
Intellectual property –
s11(gB) and s11(gC) When to Registration/ Acquisition
consider renewal of
registration

When is it  Expenditure  Expenditure was
applicable? was actually actually incurred
incurred during the year of
during the assessment to
year of acquire ( NOT
assessment develop/create) the
 It’s used in property
the  It’s used in the
production of  production of
income income
When can In year of  Claimed if brought
it be assessment into use for the 1st
claimed actually incurred time
 No apportionment
for periods used
less than a year
Deduction Expenditure x  ≤ R 5000 =
100% Cost x 100%
 > R 5000 =
Cost x 10%
(design) Cost x
5% (other)
Trademark Expenditure on Expenditure on trade
trade mark mark CANNOT be
can be claimed claimed

Lease premium – s11(f) Premium paid for the right of use/occupation of property
used in the production of income.
 Receiver (Lessor) : Include in gross income par (g)

The following cannot be classified as lease premiums:

 Does NOT qualify as income in the hands of the
recipient
 Contract is transferred from one lessee to
another
 Lessor pays lessee to vacate the building
 Amount paid by lessee for cancellation of the
lease

Remember the following:
1. Deduction is apportioned for periods less than a
year
2. It’s calculated by using the number of years of use
(including renewal periods) LIMITED to 25 years
3. If a lessee cedes/surrenders the right:
 A full year’s allowance will be included in the
year the right is ceded/surrendered