1. When can I claim for S14Q deduction?
You should claim S14Q deduction on qualifying R&R costs at the time of lodgement of your tax return for the YA for which the R&R costs were first incurred. Any qualifying R&R costs, which are not claimed in the YA for which they were first incurred, do not qualify for deduction in subsequent YAs. Any R&R costs which are incurred before you commence your business are
deemed to be incurred on the first day you commence your business. In such a case, you should claim the S14Q deduction in the YA which relates to the basis period in which you commence your business.
2. How is S14Q deduction given?
The following examples illustrate how S14Q deduction is given.
against his income for each of the YAs 2009, 2010 and 2011.
his income for each of the YAs 2014, 2015 and 2016.
$40,000 is not allowed for YA 2011.Within the new expenditure cap of $300,000 from YA 2013 onwards.
Taxpayer A is given S14Q deduction of $70,000 ($120,000 / 3 years + $30,000) against his income for the YA 2010.
3. What happens to S14Q deduction if I do not have enough trade income to fully absorb the deduction (prior to YA 2013)?
Assume that a company has an adjusted loss (before S14Q deduction) of $10,000 for YA 2010 and it is entitled to S14Q deduction of $15,000 for that YA. Its other sources of income for that YA include trade income of $2,000 and rental income of $1,000. The company’s tax computation for YA 2010 isas follows:
Trade 1 – Adjusted loss (before S14Q deduction) (10,000)
Less : S14Q deduction (15,000) (25,000)
Trade 2 – Adjusted profit (after capital allowances) 2,000
Rental income 1,000
Net trade loss (22,000)
Amount available for transfer under group relief
(10,000 – 2,000 – 1,000) (7,000)
Amount of unabsorbed S14Q deduction to be carried forward (15,000)
(Prior to YA 2013, S14Q deduction is not available for transfer under group relief
system but can be carried forward or back for offset against the taxpayer’s income.)
4. Can I claim a deduction under section 14(1)(c) on the costs I incur on replacing a renovation item that was previously granted S14Q deduction?
Yes, provided the conditions under section 14(1)(c) are satisfied and the deduction is not denied under section 15. Consequently, if you claim a deduction under section 14(1)(c), you are not allowed S14Q deduction on the same replacement costs incurred by you.
5. Can the R&R costs incurred on premises that I used for both business and other personal purposes (e.g. home offices) qualify for S14Q deduction?
For premises that are used for both business and other personal purposes,only R&R costs which are specifically identifiable to the area that is used for business purposes can qualify for S14Q deduction. If you cannot specifically identify the R&R costs to the area used for business purposes, you are not allowed to claim S14Q deduction, as no apportionment of the R&R costs is
allowable for tax purposes.
6. What are the tax consequences if I was required to seek the approval of the Commissioner of Building Control for my renovation or refurbishment works (as it involved structural changes) but failed to do so, and I had claimed a S14Q deduction on my R&R costs?
You should ensure that your R&R costs are qualifying expenditure before making S14Q deduction claim.Where a prior approval of the Commissioner of Building Control for the renovation or refurbishment works was required but you had failed to obtain 12 the necessary approval and S14Q deduction was erroneously allowed to you, an amount equal to the total deductions that were erroneously allowed to you previously is deemed as your taxable income for the YA in which the
Comptroller discovers the incorrect claim. Where there is any form of fraud or wilful default committed by a taxpayer in connection with his claim for R&R costs under section 14Q, the Comptroller can raise additional assessments on him at any time as provided under section 74(2) of ITA. Additional penalties are applicable under the ITA.
7 Is S14Q deduction applicable to a business of making investments which is subject to the provisions of section 10E of the ITA?
Yes. The business may claim S14Q deduction on the qualifying R&R costs incurred on renovation or refurbishment works done to the properties which are rented out by the business as part of its business of making investments.
You should claim S14Q deduction on qualifying R&R costs at the time of lodgement of your tax return for the YA for which the R&R costs were first incurred. Any qualifying R&R costs, which are not claimed in the YA for which they were first incurred, do not qualify for deduction in subsequent YAs. Any R&R costs which are incurred before you commence your business are
deemed to be incurred on the first day you commence your business. In such a case, you should claim the S14Q deduction in the YA which relates to the basis period in which you commence your business.
2. How is S14Q deduction given?
The following examples illustrate how S14Q deduction is given.
Example 1
Taxpayer A incurs qualifying R&R costs of $120,000 on 1 Mar 2008 (basis period is 1 Jan 2008 to 31 Dec 2008). Taxpayer A is given S14Q deduction of $40,000 (i.e. $120,000 / 3 years)against his income for each of the YAs 2009, 2010 and 2011.
Example 2
Taxpayer B incurs qualifying R&R costs of $240,000 on 31 Jan 2013 (basis period is 1 Jan 2013 to 31 Dec 2013). Taxpayer B is given S14Q deduction of $80,000 ($240,0005/ 3 years) againsthis income for each of the YAs 2014, 2015 and 2016.
Example 3
Same as Example 1 but Taxpayer A ceases business on 31 Dec 2009.Taxpayer A is given S14Q deduction of $40,000 against his business income for each of the YA 2009 and 2010. As there is no income derived from the business from 1 Jan 2010 (basis period for the YA 2011), the balance$40,000 is not allowed for YA 2011.Within the new expenditure cap of $300,000 from YA 2013 onwards.
Example 4
Same as Example 1 and Taxpayer A also incurs qualifying R&R costs of $30,000 on 1 May 2009 (basis period is 1 Jan 2009 to 31 Dec 2009). The taxpayer wishes to claim the R&R costs of $30,000 in 1 year as he has sufficient trade income for YA 2010 to fully absorb the deduction.Taxpayer A is given S14Q deduction of $70,000 ($120,000 / 3 years + $30,000) against his income for the YA 2010.
3. What happens to S14Q deduction if I do not have enough trade income to fully absorb the deduction (prior to YA 2013)?
Assume that a company has an adjusted loss (before S14Q deduction) of $10,000 for YA 2010 and it is entitled to S14Q deduction of $15,000 for that YA. Its other sources of income for that YA include trade income of $2,000 and rental income of $1,000. The company’s tax computation for YA 2010 isas follows:
Trade 1 – Adjusted loss (before S14Q deduction) (10,000)
Less : S14Q deduction (15,000) (25,000)
Trade 2 – Adjusted profit (after capital allowances) 2,000
Rental income 1,000
Net trade loss (22,000)
Amount available for transfer under group relief
(10,000 – 2,000 – 1,000) (7,000)
Amount of unabsorbed S14Q deduction to be carried forward (15,000)
(Prior to YA 2013, S14Q deduction is not available for transfer under group relief
system but can be carried forward or back for offset against the taxpayer’s income.)
4. Can I claim a deduction under section 14(1)(c) on the costs I incur on replacing a renovation item that was previously granted S14Q deduction?
Yes, provided the conditions under section 14(1)(c) are satisfied and the deduction is not denied under section 15. Consequently, if you claim a deduction under section 14(1)(c), you are not allowed S14Q deduction on the same replacement costs incurred by you.
5. Can the R&R costs incurred on premises that I used for both business and other personal purposes (e.g. home offices) qualify for S14Q deduction?
For premises that are used for both business and other personal purposes,only R&R costs which are specifically identifiable to the area that is used for business purposes can qualify for S14Q deduction. If you cannot specifically identify the R&R costs to the area used for business purposes, you are not allowed to claim S14Q deduction, as no apportionment of the R&R costs is
allowable for tax purposes.
6. What are the tax consequences if I was required to seek the approval of the Commissioner of Building Control for my renovation or refurbishment works (as it involved structural changes) but failed to do so, and I had claimed a S14Q deduction on my R&R costs?
You should ensure that your R&R costs are qualifying expenditure before making S14Q deduction claim.Where a prior approval of the Commissioner of Building Control for the renovation or refurbishment works was required but you had failed to obtain 12 the necessary approval and S14Q deduction was erroneously allowed to you, an amount equal to the total deductions that were erroneously allowed to you previously is deemed as your taxable income for the YA in which the
Comptroller discovers the incorrect claim. Where there is any form of fraud or wilful default committed by a taxpayer in connection with his claim for R&R costs under section 14Q, the Comptroller can raise additional assessments on him at any time as provided under section 74(2) of ITA. Additional penalties are applicable under the ITA.
7 Is S14Q deduction applicable to a business of making investments which is subject to the provisions of section 10E of the ITA?
Yes. The business may claim S14Q deduction on the qualifying R&R costs incurred on renovation or refurbishment works done to the properties which are rented out by the business as part of its business of making investments.
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