Depreciation allowance - plant and machinery
Assets purchased on hire purchase
- the old system applies
Such assets are not pooled under the new system.
But when all hire-purchase installments have been paid, the reducing value of
the asset will be transferred to the relevant pool.
assets on hire purchase do not become asset of the buyer until all hire
purchase installments are fully settled. Nevertheless, Section 37A of
Inland Revenue Ordinance provides initial allowances on the capital
portion of each installment and annual allowance on the reducing balance
of the full cost (which is the cash price excluding the hire-purchase
under hire purchase is deductible. So, it should be separated from the
capital cost of the asset for depreciation allowances purpose.
Click here for an illustration of depreciation allowances on assets