Page 4 - F6 - Capital Allowances - Leases

Example

In terms of a leasehold agreement of land, Builder, the

lessee, has to erect a factory (for sole use in their

manufacturing operations) to a value of R3 000 000

within a period of 18 months from the date of

commencement of the lease, which was 1 January 2014.

The lease is for a period of 20 years. On the expiry of the

lease, the factory will revert to the landlord without

compensation to Builder. At the end of the first year of

assessment (30 June 2014) the factory had not been

completed, but R1 250 000 had actually been spent on

its erection. The building was completed on 31 March

2015, at a total cost of R3 500 000, and the factory was

immediately let to tenants (that carries on a

manufacturing trade).