Raymond Yeung Tax Consultant former Assessor of Inland Revenue Department 前稅局評稅主任楊輝洪

飛鴻稅務顧問  Qualifications   出版書目  

Tel /WhatsApp /WeChat 94735846  *email: yeungfhr@qq.com  

Service charge $500/hr *Hang Seng Bank Account: 385 599279 883 *Payment thru mobile phone: PayMe / FPS轉數快 Yeung Fai Hung *會面:上水廣場5樓太興餐廰  *報稅分析 *稅務咨詢 *記帳系統 *業務報稅 *稅務課程

 

Profits Tax - Capital gain versus revenue gain

Section 14 of Inland Revenue Ordinance exempts profits arising from the sale of capital assets. Even without this exemption, it is a generally accepted accounting practice that capital income should not be included in trading profits. 

There are a number of court cases on the captioned question: drawing distinction between income from “fixed capital” and income from “circulating capital” --- referring the former to “capital receipts” and the latter to “revenue receipts”. 

It has been established from case law that “fixed capital” is what the owner turns to profit by keeping it in his own possession; whereas “circulating capital” is what he makes a profit of by parting with it and letting it change masters. It follows that land and buildings, plant and machinery, long-term leases and goodwill are fixed capital retained and used in the business --- they form part of the permanent structure of the business --- any receipt from their sale, or compensation for their loss or damage, are capital receipts and non-taxable. 

On the other hand, an asset forms part of the circulating capital if its is acquired in the ordinary course of business --- it is to be sold, or to be manufactured for goods to be sold --- for example: trading stock and raw materials --- any receipt related to such items are revenue receipts and taxable. 

A summary of capital versus revenue receipts is given by Black's Law Dictionary (5th edition) as follows:

  • Profit: Most commonly, the gross proceeds of a business transaction less the costs of the transactions; i.e. net proceeds. Excess of revenues over expenses for a transaction; sometimes used synonymously with net income for the period. Gain realized from business or investment over and above expenditures.

  • Revenue: Return or yield; profit, as that which returns or comes back from an investment; the annual or periodical rents, profits, interest or issues of any species of property...

  • Capital: Accumulated goods, possessions, and assets, used for the production of profits... In accounting, the amount invested in a business.

Click to read the following.

1. Compensation receipts

2. Voluntary receipts

3. A tax case on how to turn a revenue receipt into capital receipt

Indeed, the question of capital versus revenue is important for taxation, not just concerning the taxability of an income but also affecting the deductibility of an expenditure. For its effect on the deductibility of an expenditure, please click here.

 

 

楊輝洪 Raymond Yeung 為你提供:

 

* 稅務顧問服務 * 飛鴻作品下載 * 寫好英文信件 * 基礎法律知識 * 實用稅務課程 * 英文速成課程 * 見工英語速成 * 中英文寫作服務 * 電腦會計記帳系統

 

 

email: yeungfhr@qq.com

Tel /WhatsApp 94735846

 

 

My Performance Pledge QEEP

My Curriculum Vitae/resume

Value for Money, for sure!

Why you must own my CDR 

Why my service fee is so low

 

 

 

 

香港稅務課程 Practical Taxation Course

教授實用税務及報稅知識

Private tuition of Hong Kong Taxation of Law and Practice

$900 兩小時,單對單教授,:香港稅務知識加強版香港報稅軟體

報讀者可在一年內免費電話咨詢一次  詳情按此