Selling or Scrapping Fixed Assets

When a fixed asset is sold or written off, you need to calculate balancing allowance (BA) or balancing charge (BC) if capital allowance has been claimed for the asset previously. BA is tax deductible whereas BC is taxable income.

Calculating BA / BC

BA and BC are the difference between the sale proceeds and the tax written down value (TWDV) of the asset disposed. TWDV is the cost of the asset less the amount of capital allowance allowed previously.

Sale Proceeds - TWDV = BA or BC

Where the sale proceeds is lower than the TWDV, the difference is known as BA. BA is tax-deductible.

Where the sale proceeds is higher than the TWDV, the difference is known as BC. BC is taxable as income. The amount of BC taxable is restricted to the total amount of capital allowance allowed previously in respect of the asset disposed.

Example of BA / BC calculation

DescriptionFurnitureComputerVan

Cost

3,000

2,000

20,000

TWDV

1,000

0

13,333

Less: Sale proceeds

200

200

21,000

BA

800

  

BC

 

200

(7,667)
restricted to 6,667*

*Amount of BC taxable is restricted to $6,667 ($20,000 - $13,333) which is the total capital allowance claimed previously.

Special Situation: Donation of Computers

Donors are granted tax deduction in respect of donation of computers to prescribed educational, research or other institutions and all IPCs made before 21 Feb 2017. A valuation of the computers to be donated is required and is presently done by Infocomm Media Development Authority (IMDA).

A company may have incurred capital expenditure on computers bought for the purpose of its own trade and claimed capital allowance on the computers. However, if it subsequently does not use them and donates them to one or more IPC, a Balancing Charge equal to the value of the donated items (as assessed by IMDA) will be taxed.

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