Page 6 - RSM Budget 2021 Highlights

CORPORATIONS

AND BUSINESSES

Loss Carry-back Relief Scheme Acceleration of Renovation and
Current Refurbishment Expense Claim

The Loss Carry-back Relief scheme was enhanced Current
for YA2020. Under the enhanced scheme, current Taxpayers who incurred qualifying expenditure on
year unabsorbed capital allowances and trade renovation and refurbishment (“R&R”) during the
losses (collectively referred to as “qualifying basis period for YA2021 (i.e. FY2020) for the
deductions”) for YA2020 may be carried back up to purposes of their trade, profession or business were
three immediate preceding YAs, capped at given an irrevocable option to claim R&R deduction in
$100,000 of qualifying deductions, subject to one YA (i.e. accelerated R&R deduction). The cap of
conditions. $300,000 for every relevant period of three
consecutive YAs applied.
Taxpayers were allowed to elect to carry back to the
relevant preceding YAs an estimated amount of The option above was in addition to the existing
qualifying deductions available for YA2020, before option under Section 14Q of the ITA.
the actual filing of their income tax returns for
YA2020. Proposed changes

Proposed changes To continue providing support to businesses, the
option to claim R&R deduction in one YA (i.e.
To continue providing support to businesses, the accelerated R&R deduction) will be extended to
enhancements to the Loss Carry-back Relief qualifying expenditure incurred on R&R in the basis
scheme for YA2020 will be extended to apply to period for YA2022 (i.e. FY2021), with the same
qualifying deductions for YA2021, with the same parameters.
parameters.

Effective date
Effective date
The option to claim R&R deduction in one YA is
The enhanced Loss Carry-back Relief scheme is extended to qualifying expenditure incurred in
extended to apply to qualifying deductions for YA2022 (i.e. FY2021).
YA2021.

Comments
Comments
 This extension would encourage businesses to
 The extension of the enhanced Loss Carry- undertake R&R projects during the present lull
back Relief scheme is beneficial to businesses period of low economic activities so as to be
that have tax losses to carry back to qualifying ready when the economy recovers from the
prior YAs with taxable positions. Companies pandemic.
which are eligible to take advantage of this
scheme would secure a cash refund of prior
years’ taxes paid and that would ease their cash  The expenditure cap in question has remained at
flow position somewhat. $300,000 for a good number of years. It would
be more impactful if this cap is adjusted upward
so that it would benefit those companies that
 It is however disappointing to note that the cap had already exceeded the cap. Also for certain
remains at $100,000 which is relatively low. business sectors such as retail, food and
Many businesses incurred losses far in excess beverage and hotel, the present expenditure
of this limit during the pandemic. A much higher cap is plainly inadequate.
cap is therefore warranted.

BUDGET 2021 HIGHLIGHTS | 5