A car tuition company refers to a company that holds a driving school licence and with it, provides car driving instructions for a fee.
Your car tuition company may claim deduction on expenses incurred on cars used principally for instructional purposes, subject to Sections 14 and 15 of the Income Tax Act (ITA). Capital allowances may also be claimed on the cost of acquiring such cars. These cars used principally for instructional purposes are described as 'For Instruction (Co)' in the Vehicle Log Card.
The income generated from the business of providing driving instruction for cars is to be quarantined i.e. losses and capital allowances arising from such activities cannot be deducted against other income. However, unutilised losses and unutilised capital allowances can be carried forward to be deducted against income derived from the same business in subsequent Years of Assessment (YAs), subject to Sections 23(4) and 37(12) of the ITA.
Unutilised losses and unutilised capital allowances remaining upon the cessation of the car tuition business will be disregarded.
The requirement to quarantine the income from the business of providing car driving instruction does not apply to unutilised losses and unutilised capital allowances relating to YA 1999 and before. Therefore, such unutilised losses and unutilised capital allowances are available for deduction against other income derived by your car tuition company.
If your car tuition company carries on other businesses, you are required to keep separate records and accounts to enable the income and expenses relating to the business of providing driving instruction for cars to be readily identified and ascertained separately from the income/ expenses of the other businesses.
Learn more about your company's record keeping requirements.