The notion of receiving tax benefits has always been a major concern for every business owner or self-employed individual. Most of them have always complained that the government does too little to ensure that some form of tax reduction or benefit can be received when one owns a business. Although to some extent the notion just explained may be true, there is a type of allowance that can be capitalized on primarily through the ownership of assets when used within your business. These benefits are received via a calculated percentage that is depreciated yearly based on the category or type of assets. This is ultimately called or known as ”capital allowance” and the rates are based on the type of asset as shown below:

– Motor Vehicles (Used in Businesses) 20%

– Motor Vehicles (Personal uses) 12.5%

– Equipment 12.5%

– Furniture 10%

– Computers 22.5%

– Printers 22.5%

– Buildings 4% 

How is Capital Allowance Calculated?

The Capital Allowance for each asset type is calculated based on its given depreciation rate on a yearly basis based on the purchase value of the asset. For example, if you have a haulage company and thus have trucks that you used within the business, you will use the purchase of each truck times the stipulated capital or depreciation rate of 20% to find its ‘yearly capital allowance rate’. Thus, you would have a calculated rate as shown below:

Total Trucks Value or Purchase Value: $10M 

Capital Allowance Rate: 20%

Capital Allowance Value: $10M X 20% = $2M

*The amount remaining of $8M is then ‘brought forward’ to the proceeding year to be then depreciated by the same amount or rate as used in the first year. The amount brought forward is therefore used until the asset is either sold or has reached the end of its useful life.

It is also important to note also that there is an initial rate of the said amount that is given or claimed within the same year that the asset was purchased as an allowance as well to lessen your taxes. 

Is the Depreciated or Capital Allowance rate used as an expense?

The answer is the ultimate ‘YES’. The capital allowance calculated is used as an expense and is plugged within a special section of your yearly tax return and hence ultimately provides a legal way for you to lessen your taxes. Thus, it’s not too bad to try to own some assets to be used within your business after all.

If you need help or further information, please feel free to contact us at 1 (876) 902-7259 | 545-6928 or email us at BIZcareConsultationAcct@Gmail.com to arrange your consultation session. Do remember at BIZcare “Your Business is our Priority”. We offer the services of:

  1. Business Registration
  2. Tax Filing
  3. GCT Filing
  4. Payroll Services
  5. Consultation Services
  6. TCC Services

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Written by: Kmar Henry [ CEO |BIZcare Consultation & Accounting Firm Limited ]

Edited by: Sheryl Bailey [ Director | BIZcare Consultation & Accounting Firm Limited ]

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