TNAG-0960-FCO40-1179-Legislation-for-merchant-shipping-in-Hong-Kong-1980 — Page 11

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Ord. No. 63/80

Balancing

allowances and charges

under the

pooling system.

INLAND REVENUE (AMENDMENT) (NO. 4)

and the reducing value of such machinery or plant 11 be deemed to be such an amount as the Commissioner may consider it would have realized had it been sold in the open market at the time it ceased to be used wholly and exclusively in the production of such profits, and such reducing value shall be excluded from the total reducing value of that class of machinery or plant.

(4) For the purposes of subsection (2), in the applica- tion of section 37A, subsection (2) of that section shall be read as if "during the basis period" was substituted for "at the end of the basis period".

39D. (1) Where at the end of a basis period for a year of assessment the aggregate reductions made under section 39B(4) in respect of a class of machinery or plant exceed the aggregate capital expenditure incurred by a person on the provision of machinery or plant belonging to that class--

(a) a charge, to be known as a “balancing charge", shall be made on him, and the amount on which it is made shall be an amount equal to the excess; and

(b) the reducing value at the end of the basis period

for that year of assessment shall be nil.

(2) Subject to subsection (3) and except where subsec- tion (4) applies, where a person ceases to carry on his trade, profession or business in a year of assessment, the aggregate of the sale, insurance, salvage or compensation moneys, if any, of the machinery or plant in respect of which an initial allowance or annual allowance has been made shall be compared with the amount of the reducing value of the class of machinery or plant at the end of the basis period for that year of assessment and-

(a) where there are no sale, insurance, salvage or com- pensation moneys, or where the amount of the reducing value exceeds the aggregate of such moneys, an allowance, to be known as a "balancing allowance", shall be made to him, and the amount thereof shall be the amount of the reducing value or, as the case may be, the excess thereof over the aggregate of the said moneys; or

(b) where there are sale, insurance, salvage or com- pensation moneys, and the aggregate of such moneys exceeds the amount, if any, of the reducing value, a charge, to be known as a "balancing charge", shall be made on him, and the amount on which it is made shall be an amount equal to the excess or, where the reducing value is nil, to the aggregate of the said moneys.

(3) Subsection (2) shall not apply on the occasion on which any machinery or plant, to which section 39B(7) applies, passes by way of succession.

(4) Where by reason of a person ceasing to carry on his trade, profession or business machinery or plant in respect of which an initial allowance or annual allowance has been made is put out of use and there are no sale, insurance, salvage or compensation moneys, such person shall, subject to subsection (5), be deemed to have received

4.

INLAND REVENUE (AMENDMENT) (NO. 4)

Ord. No. 63/80

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immediately prior to such cessation, sale moneys for such machinery or plant of such an amount as the Commissioner may consider it would have realized had it been sold in the open market at the time of cessation.

(5) If a person sells any machinery or plant referred to in subsection (4) within 12 months of the date of cessation he may claim the adjustment of any balancing allowance or balancing charge which may have been made to or on him as if such sale had taken place immediately prior to the date of cessation and notwithstanding section 70 an assessor shall make any necessary correction to any assess- ment.

(6) Notwithstanding anything contained in this section, where the aggregate of any sale, insurance, salvage or compensation moneys in respect of any machinery or plant exceeds the capital expenditure incurred on the provision of that machinery or plant, the aggregate of such moneys shall---

(a) for the purposes of calculating a balancing charge

under subsection (2)(b); and

(b) in calculating the reducing value of the class of

machinery or plant under section 39B(4),

not exceed the capital expenditure incurred on the provision of that machinery or plant.

(7) For the purposes of subsection (6), the capital expenditure of the machinery or plant shall be taken as-

(a) in a case where section 37(2A) applies, the "cost of the asset" computed in accordance with that section;

(b) in a case where section 39B(6) applies, the capital expenditure computed in accordance with that section; or

(c) in any other case, the aggregate capital expenditure incurred by the person in question on the pro- vision of the machinery or plant for the purposes of producing profits chargeable to tax under Part IV.".

Section 40(1) of the principal Ordinance is amended by inserting, Amendment of after the definition of "capital expenditure on the provision of machinery section 40. or plant", the following definition—

"class of machinery or plant" means the items of machinery or plant for which the same rate of depreciation is prescribed by the Board of Inland Revenue.".

Passed by the Hong Kong Legislative Council this 5th day of November 1980.

LORNA LEUNG,

Clerk to the Legislative Council.