Industrial Building Allowance
Only the capital expenditure in
respect of the construction of the building qualifies the allowance. The
cost of site is specifically excluded by Section 40 of the Inland Revenue
construction of the building does not include the cost of site or
preparation and leveling of land. But it can include expenditure on work
done preparatory to laying foundations, laying drains, sewers and
water-mains to serve the building. The part of construction cost to be
reimbursed by any grant or subsidy should be excluded. However, any
interest or commitment fee incurred in respect of a loan obtained for the
building can be added to the construction cost.
advisable to separate the cost of plant and machinery (e.g. central
air-conditioning, lift machinery) from the cost of construction of the
building. This is because plant and machinery can attract more generous
Because of the requirement for
“expenditure on construction”, instead of on the provision of the asset as
in the case of plant and machinery, the price paid for the a second-hand
building does not by itself give rise to IBA.
“Expenditure incurred” means the
expenditure for which the claimant has become legally liable to pay.
qualifying trade is
established, all part of the building or structure used for that trade
will qualify except the following parts: dwelling house (other
than that for manual worker), retail shop, showroom, hotel or office. Nevertheless, if the expenditure
on the above non-qualifying parts does not exceed 10% of
the total expenditure of the whole building, the exception will be
disregarded --- in that case, the whole building, including the non-qualifying
parts, will be accepted as an industrial building.
Although the storage forming part
of a non-qualifying trade cannot attract the allowance, a trade
of storage can.
for more about IBA.