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標題: A Tax Computation Question [打印本頁]

作者: dejavu2003 時間: 2006-8-17 21:20 標題: A Tax Computation Question

I am sure it's a simple question to most of you, but it's been 20 years since I did my last tax computation and I am sure the law has changed.  This is on disposal of fixed assets - eg.

Book WDV                $100
Proceeds on disposal    60
                           ----------
Loss on Disposal       $  40
                           =====

I believe the $40 loss needs to be added back.  But what about the proceeds?  Should the $60 proceeds be deducted from the Tax WDV?

Thank you in advance.

作者: 軍師 時間: 2006-8-17 23:22

No need to charge any tax for the transaction as the sale does not make any so called profit.

作者: dejavu2003 時間: 2006-8-17 23:35

引用:

原帖由軍師於 2006-8-17 03:22 PM 發表
No need to charge any tax for the transaction as the sale does not make any so called profit.

No, it doesn't answer the question but thanks anyway.

作者: fatyin168 時間: 2006-8-17 23:54

There should be no change on this tax issue. So, it should be deducted from the Tax WDV. If there is surplus, then there will be a balancing charge, however, if there is deficit, then it will incur as balancing allowance.

作者: dejavu2003 時間: 2006-8-18 00:14

引用:

原帖由 fatyin168 於 2006-8-17 03:54 PM 發表
There should be no change on this tax issue. So, it should be deducted from the Tax WDV. If there is surplus, then there will be a balancing charge, however, if there is deficit, then it will incur ...

Balancing charge/allowance was the method we used decades ago but I have since seen tax computation where proceeds were deducted from the Tax WDV. I can see the logic of that - for simplicity. That being the case, it will be illogical to apply the balancing charge/allowance again. By adding back the book loss (or subtracting the book gain) and deducting the proceeds from the tax wdv, it would ultimately have the same effect of the old method of calculating the balancing charge/allowance. To put it again in the computation would be a double dipping, if you know what I mean.

Again, thanks for your advice.

作者: dejavu2003 時間: 2006-8-18 00:41

引用:

原帖由 dejavu2003 於 2006-8-17 04:14 PM 發表

Balancing charge/allowance was the method we used decades ago but I have since seen tax computation where proceeds were deducted from the Tax WDV. I can see the logic of that - for simplicity. ...

This is the logic I am using -

In the above example, if the proceeds is $60, and it cost say $500, a total of $440 has been "consumed" and tax deduction should be allowed thereon. Using what I thought was the current method, a $500 addition was put into a X% pool, ultimately depreciated to zero if no disposal, and now sold for $60 which is then subtracted from the tax wdv, so ultimately, $440 would be allowed as depreciation allowance. Hence, I don't think any further balancing allowance/charge would be needed to caculate the assessable profit.

作者: 師父 時間: 2006-8-18 09:57

引用:

原帖由 dejavu2003 於 2006-8-17 01:20 PM 發表
I am sure it's a simple question to most of you, but it's been 20 years since I did my last tax computation and I am sure the law has changed. This is on disposal of fixed assets - eg.

Book WDV ...

hope this is not too late.

the 40 loss is added back to profit per account. ie, if profit per account is 100, it becomes 140, then less depreciation allowance.

the 60 sales proceeds is subtracted from the WDV (Written down value) of the Depreciation allowance, after the current year's initial and annual allowance. ie if WDV b/f is 130, initial alloance = 0 and annual allowance =25, then it becomes 130-0-25-60 = 45. if there is other items left in the class then 45 is carred forward to next year. otherwise 45 credited as balancing allowance.

see atached file. (change .rar to .doc)

[ 本帖最後由師父於 2006-8-18 10:15 AM 編輯 ]

作者: dejavu2003 時間: 2006-8-18 10:12

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原帖由師父於 2006-8-18 01:57 AM 發表

hope this is not too late.

the 40 loss is added back to profit per account. ie, if profit per account is 100, it becomes 140, then less depreciation allowance.

the 60 sales proceeds is subt ...

I think your answer is spot on.  There's no balance allowance/charge any more specially on the assets disposed but of course if the pool becomes negative after subtracting the proceeds. obviously there will be a balancing charge as you cannot have a negative $ in the pool.  So can I assume that balancing allowance is now history as the proceeds are not measured against the tax WDV of the specific assets disposed, except maybe when you close the business for good?

One minor technical question on how the proceeds are deducted from the pool.  I think it should first be deducted before the annual allowance is calculated.  This is how we did it in the old days in the balancing charge/allowance era.  The general principle is that you were given full year allowance in the year of acquisition, so you are not getting any allowance in the year of disposal.

Thanks 師父 for the input.  This saves me 20 grand.

While I get you guys there, one more question on capex.

If I knock a hole in the wall, I can only claim commercial building allowance.  When I vacate the premises and deliver vacant possession to the landlord, I have to restore it to the original condition by rebuilding the wall, can I expense it for tax purpose oor am I only able to claim commercial building allowance? In theory I think I am making good the damages, so it's not capital in nature.

[ 本帖最後由 dejavu2003 於 2006-8-18 02:17 AM 編輯 ]

作者: 師父 時間: 2006-8-18 10:24

引用:

原帖由 dejavu2003 於 2006-8-18 10:12 AM 發表

I think your answer is spot on. There's no balance allowance/charge any more specially on the assets disposed but of course if the pool becomes negative after subtracting the proceeds. obvio ...

i have added a file above. take a look.

as for the hole question, to tell u the truth, i don't know and who cares. expense it and if the tax people don't think is correct, they'll let u know.

even if u put it in commercial building allowance, when u vacate the premises shouldn't u put everything to balancing allowance and then strat from zero for the new premises ? in that case it wouldn't matter whether u expense it in the account or put it to commericl building allowance.

作者: 師父 時間: 2006-8-18 10:30

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原帖由 dejavu2003 於 2006-8-18 10:12 AM 發表

I think your answer is spot on. There's no balance allowance/charge any more specially on the assets disposed but of course if the pool becomes negative after subtracting the proceeds. obvio ...

you may be correct on the order of the sales proceeds and the allowance. my understanding is that if you can identify the item and keep track of the balance amongst others then you should deducted the sales proceeds first and then do the balancing allowance or charge. but since small firms usually don't (

), we just do it at the bottom and usually we get through the IRD with that

作者: dejavu2003 時間: 2006-8-18 10:43

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原帖由師父於 2006-8-18 02:24 AM 發表

i have added a file above. take a look.

as for the hole question, to tell u the truth, i don't know and who cares. expense it and if the tax people don't think is correct, they'll let u know ...

Under the current tax regime, I don't think you can claim a balancing allowance against a specific disposal. Everything should be pooled and the proceeds deducted from the pool. Let me check with my former colleagues who are still in the trade.

作者: dejavu2003 時間: 2006-8-18 12:01

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原帖由師父於 2006-8-18 02:24 AM 發表

i have added a file above. take a look.

I just did a tax computation as simple as your example, although copyng the prior years' computations prepared by a big-4 firm, there are 10 schedules. I decided to take on it myself this year.

What do you think a tax return like that would cost to prepare?

作者: 師父 時間: 2006-8-18 13:25

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原帖由 dejavu2003 於 2006-8-18 12:01 PM 發表

I just did a tax computation as simple as your example, although copyng the prior years' computations prepared by a big-4 firm, there are 10 schedules. I decided to take on it myself this ye ...

just tax or tax + audit?
don't know about big 4. but my boss usually charges around 10k for tax + audit for a small company, and in some rare cases up to 25k for some bigger ones that's making big profit. i guess big 4 would probably be 3 or 4 times that.

作者: dejavu2003 時間: 2006-8-18 13:44

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原帖由師父於 2006-8-18 05:25 AM 發表

just tax or tax + audit?
don't know about big 4. but my boss usually charges around 10k for tax + audit for a small company, and in some rare cases up to 25k for some bigger ones that's making ...

Just Tax, no audit. - what can we reasonable expect to be charged?

We are more than just a small company but the nature of our business and our setup really makes the audit easy, I think. Auditors have other ideas and they charge much more than 3/4X of $25K.

作者: 師父 時間: 2006-8-18 14:10

引用:

原帖由 dejavu2003 於 2006-8-18 01:44 PM 發表

Just Tax, no audit. - what can we reasonable expect to be charged?

We are more than just a small company but the nature of our business and our setup really makes the audit easy, I think. ...

don't understand. u need an audited account for your tax return and auditors usually will do tax + audit for one price (at least that's how we work). u can even do it yourself if you have the accounts, as u are in the trade yourself. but anyway i think 1 or 2k is more than enough to find a small accounting firm to help you fill in the tax return and do the tax computation, if you have the audit completed, because they are not taking any risk, just one or two hours of clerical work.

[ 本帖最後由師父於 2006-8-18 02:12 PM 編輯 ]

作者: dejavu2003 時間: 2006-8-18 14:20

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原帖由師父於 2006-8-18 06:10 AM 發表

don't understand. u need an audited account for your tax return and auditors usually will do tax + audit for one price (at least that's how we work). u can even do it yourself if you have the acc ...

the audit is done by a big-4 (not including tax) and naturally, you would let them do the tax, by a different team and at a separate fee.  It never crossed my mind to give the tax job to another firm despite the outrageous fee relative to the small work  - until the European Law does not allow the same firm doing the audit to prepare the tax computation.  However, I can prepare a stupid (EBIT X tax rate) computation for them to review, and that's allowed.  Then I have had enough and give me good excuse to boot them out without my headoffice wondering why.  I said I am knowledgeable enough not to do stupid things like that.

So I copied their previous computation and as I told my counterpart in US - " It took me one hour - 30 mins. to do the photocopying and 30 minutes to do the computation itself".

You know what the fee quoted for this year -  $20,000

作者: 師父 時間: 2006-8-18 14:42

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原帖由 dejavu2003 於 2006-8-18 02:20 PM 發表

the audit is done by a big-4 (not including tax) and naturally, you would let them do the tax, by a different team and at a separate fee. It never crossed my mind to give the tax job to anothe ...

20k for tax only ............ what can i say, but then, you are talking about big 4. their partners got luxury boats and women and big apartments and ...........

if you have to report to head office, your choice will be limited but what the hell, i am sure many firms will be more than happy to do it for 5k.

作者: HJ2127_ATR1 時間: 2006-8-18 15:28 標題: 回復 #17 師父的帖子

多謝幾位師兄對答，Ｅ度唔只叫Accounting應該加埋Auditing。　

作者: 師父 時間: 2006-8-18 15:31

引用:

原帖由 HJ2127_ATR1 於 2006-8-18 03:28 PM 發表
多謝幾位師兄對答，Ｅ度唔只叫Accounting應該加埋Auditing。　

我老細話過, AUDIT 永遠都好做過 ACCOUNT, 因為
.
.
.
.
.
.
AUDIT 可以放飛機

作者: HJ2127_ATR1 時間: 2006-8-18 15:41 標題: 回復 #19 師父的帖子

如果公司有Internal Audit通常都同Accounting唔岩Key。　

我就覺得做Audit一係就認真得過龍，一係就十下十下。　

作者: dejavu2003 時間: 2006-8-18 18:13

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原帖由師父於 2006-8-18 06:10 AM 發表

as u are in the trade yourself

Actually, I can literally call myself out of the trade. I couldn't have done our tax computation had it not been that simple. I just rely on the computation last year and my antiquated knowledge in this area. I only update my knowledge selectively and sporadically. I seldom do CPD. I seldom read journals/mails from accounting bodies. And I am seriously thinking of withdrawing from all accounting bodies by the end of this year.

作者: dejavu2003 時間: 2006-8-18 18:16

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原帖由 HJ2127_ATR1 於 2006-8-18 07:41 AM 發表
如果公司有Internal Audit通常都同Accounting唔岩Key。　

我就覺得做Audit一係就認真得過龍，一係就十下十下。　

I was the latter (十下十下).

You wouldn't know when you were an auditor, but by the time you are on the other side of the fence, you know how ignorant you were as an auditor.

作者: HJ2127_ATR1 時間: 2006-8-19 10:22 標題: 回復 #22 dejavu2003 的帖子

我都明既，就係因為我唔係做Audit，而係做佢既對家，先會有敢既結論，不過現實生活，我真係見唔少，事先聲明，唔係話你。

當我做Audit既角色，我就會覺得Accountingｄ人唔合作，處處為難，你話係咪。　

作者: fatyin168 時間: 2006-8-19 11:34

引用:

原帖由 dejavu2003 於 2006-8-17 04:14 PM 發表

Balancing charge/allowance was the method we used decades ago but I have since seen tax computation where proceeds were deducted from the Tax WDV. I can see the logic of that - for simplicity. ...

I've not touch the Tax Computation for a long time. Thanks for your updated. May be I need to have some study to refresh my knowledge on Tax.

作者: fatyin168 時間: 2006-8-19 11:40

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原帖由 HJ2127_ATR1 於 2006-8-19 02:22 AM 發表
我都明既，就係因為我唔係做Audit，而係做佢既對家，先會有敢既結論，不過現實生活，我真係見唔少，事先聲明，唔係話你。

當我做Audit既角色，我就會覺得Accountingｄ人唔合作，處處為難，你話係咪。　

Since my first joining the accounting field, I reject to be an Auditor. However , from my experience, I can co-operate with the Audit Guys very well as we should be well understanding that we all want to complete our task only. Everything can be compromise.

作者: dejavu2003 時間: 2006-8-19 15:50

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原帖由 fatyin168 於 2006-8-19 03:40 AM 發表

Since my first joining the accounting field, I reject to be an Auditor. However , from my experience, I can co-operate with the Audit Guys very well as we should be well understanding that we a ...

why reject to be an auditor? this might be a wrong decision?

作者: dejavu2003 時間: 2006-8-19 16:15

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原帖由 HJ2127_ATR1 於 2006-8-19 02:22 AM 發表
事先聲明，唔係話你。

。　

I know. But looking back, I was really 十下十下 wor.

作者: dejavu2003 時間: 2006-8-19 16:22

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原帖由 fatyin168 於 2006-8-19 03:34 AM 發表

I've not touch the Tax Computation for a long time. Thanks for your updated. May be I need to have some study to refresh my knowledge on Tax.

等閒上嚟同D師兄/"師父"兄研究吓。

作者: fatyin168 時間: 2006-8-21 15:51

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原帖由 dejavu2003 於 2006-8-19 07:50 AM 發表

why reject to be an auditor? this might be a wrong decision?

The salary is too cheap la.

作者: dejavu2003 時間: 2006-8-21 21:35

引用:

原帖由 fatyin168 於 2006-8-21 07:51 AM 發表

The salary is too cheap la.

OIC.  I hope you've made the right choice, although my view is, if you don't have too much financial obligations, it might be worth your while to go for the audit job to get a wider exposure.

When I came out of school, I got two offers -
1.  Peat Marwick - $375 X 13
2.  Hang Seng Bank - $680 X 17

I picked the former, and for years, I had been wondering if I made the right choice.  Financially, I might be better off working for the bank, as the low interest staff mortgage would allow me to take advantage of the property boom for the ensuing years.  But accounting was what I wanted to do since Form 3.

Anyway, good luck and have fun with what you are doing.

作者: taurus 時間: 2006-8-22 13:22

引用:

原帖由 dejavu2003 於 2006-8-21 21:35 發表

OIC. I hope you've made the right choice, although my view is, if you don't have too much financial obligations, it might be worth your while to go for the audit job to get a wider exposure.
...

Hi brother dejavu2003,

If you're working for Hang Seng, you would not be posting your writings here, but on Banking Field ... haha ...

作者: dejavu2003 時間: 2006-8-22 23:52

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原帖由 taurus 於 2006-8-22 05:22 AM 發表

Hi brother dejavu2003,

If you're working for Hang Seng, you would not be posting your writings here, but on Banking Field ... haha ...

If I had worked for Hang Seng, I would have retired by now, in comfort.

作者: taurus 時間: 2006-8-23 06:40

引用:

原帖由 dejavu2003 於 2006-8-22 23:52 發表

If I had worked for Hang Seng, I would have retired by now, in comfort.

Hi brother dejavu2003,

Life always makes jokes on us ! I just take it as it comes and enjoy what I still have now ...

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