Depreciation is added back. Only what you claim replaces it, and a renovation claim missed in its year does not come back

WHAT QUALIFIES

Plant is the apparatus. Renovation is the setting. Structure is the building.

IRAS’s test for plant and machinery has three parts: the asset is not trading stock, it functions as apparatus with which the business is carried on, and it is not part of the setting or the premises in which the business is carried on. A treatment table, a van, a laptop and a signboard pass. Flooring, a false ceiling, general lighting and fixed partitions fail the third part, because they are the setting, and the Act sends them to Section 14N instead, provided they do not touch the structure of the building. The line is a question of fact and function: movable partitions are plant, fixed ones are renovation, and display lighting chosen to sell the goods is plant where general lighting is not.

The third bucket is the one that costs money. Works that alter the structure and need the Commissioner of Building Control’s approval are neither plant nor renovation. IRAS points such costs to the Land Intensification Allowance, which has conditions of its own, needs EDB or BCA approval and is never automatic; it is not written for a clinic or a shop. The Act also shuts out private and business cars however they are used, apart from private hire and instructional cars used as such, and any part of a cost met by a capital grant from the Government or a statutory board approved on or after 1 January 2021, so allowances are given on the net cost. Assets have to be used in the company’s own trade. The renovation deduction has one gate of its own: the company must be carrying on a trade or business, so an investment holding company cannot claim it.

THE SPEEDS

One year, three years, or the working life. The two-year option is closed.

A capital allowance is claimed from the year the cost is incurred, which IRAS defines as the year the legal liability to pay arises, not the year the invoice is settled. On hire purchase the allowance follows the deposit and principal actually paid in each year, with the interest deducted separately as an expense. The method is chosen asset by asset, and the choice sets the pace, not the total: short of a disposal, every method writes off the same cost in the end.

Faster is not always better. A claim under the one-year or three-year method can be deferred, in whole or in part, and the unclaimed cost simply waits as tax written down value; the two-year option allowed no deferment. Under the working-life method the initial allowance belongs to the year the cost is incurred and, if it is not claimed then, the annual allowance is computed on the full cost instead, so nothing is forfeited; the annual allowance itself can be deferred. IRAS names the two cases where companies defer: a loss year, and the years a company qualifies for the start-up exemption, when a deduction is worth less or nothing. Allowances claimed in a loss year become unutilised allowances that can be carried forward indefinitely, but only if the same shareholders hold at least 50% of the shares on the last day of the year the allowances arose and the first day of the year they are used, and only against the same trade; IRAS can waive the shareholding test on application where the change of ownership had genuine commercial reasons. A deferred claim carries neither condition. Up to S$100,000 of a year’s unutilised allowances and losses can instead be carried back and set off against the preceding year’s income, subject to the same tests.

THE RENOVATION DEDUCTION

S$300,000 per three-year block, in one year or three, claimed in its year or lost.

Section 14N gives a deduction, not an allowance, for qualifying renovation and refurbishment of business premises. Three rules shape every claim.

The qualifying list is IRAS’s own and it is specific: general electrical installation and wiring, general lighting, hot and cold water systems, gas, kitchen and sanitary fittings, doors, gates and roller shutters, fixed partitions, wall coverings, flooring, false ceilings and cornices, windows and grilles, canopies and awnings, fitting rooms, non-structural hacking, hoarding, the water meter for the works and the insurance on them, and ornamental features that are not fine art. Since YA 2025 the designer’s and other professional fees qualify too, so long as they do not relate to work that needed Building Control approval. Antiques, fine art, works to staff housing and anything structural stay out.

Two consequences follow from the deduction being a deduction rather than an allowance. There is no balancing adjustment when the fit-out is later ripped out or handed back to a landlord, and a deduction that has been claimed but cannot be absorbed in the year forms part of the trade loss, to be carried forward, carried back or transferred under group relief on the usual conditions. That is a different thing from a cost never claimed in its year, which is simply lost. Nothing is filed with the claim, but IRAS expects three things to be produced on request: an itemised list of the works with the address of the premises, confirmation that none of the works needed the Commissioner of Building Control’s approval, and the invoices and payment records, all kept for five years.

THE WORKED FIT-OUT

S$180,000 of invoices: S$126,000 now, S$46,000 later, S$8,000 never.

The clinic’s contractor, equipment supplier and designer sent eight invoices in 2026. Each line below is claimed at the fastest pace the law allows for it, which is what the computation looks like when someone has gone through the file. The schedule assumes the company is under the partial exemption rather than the start-up exemption, that every item is used in the trade, that the treatment tables and rehabilitation equipment cost more than S$5,000 apiece, that no other low-value claims are made that year, and that the software is on IRAS’s prescribed list.

Had the clinic been in its first three Years of Assessment, with the start-up exemption taking 75% of the first S$100,000 of chargeable income and 50% of the next S$100,000, the fastest pace might have been the wrong one: a deduction against income in the 75% band saves 4.25 cents in the dollar, half of what it saves under the partial exemption and a quarter of the 17% rate. The capital allowances could be deferred into YA 2028 and beyond. The renovation could not, and must still be claimed for YA 2027; the only lever on it is the election, and three years rather than one moves S$44,000 of the S$66,000 into the next two years. Whether that comes out ahead depends on the profits expected in those years.

SELLING, AND MISSING

An allowance settles up on sale. A missed renovation claim does not come back.

When an asset that has earned allowances is sold, scrapped or converted into stock, the computation compares what it fetched with its tax written down value. Suppose the clinic sells the treatment equipment after two years of three-year allowances, when its written-down value is S$18,000. Sold for S$25,000, the S$7,000 above that value is a balancing charge, taxed as income and capped at the allowances claimed. Sold for S$12,000, the S$6,000 shortfall is a balancing allowance, deducted. Scrapped, the whole S$18,000 is deducted. A sale to a related company with 50% or more common shareholders can be elected under section 24 to pass the asset across at written-down value with no adjustment on either side. The renovation works carry no such adjustment at all, whatever becomes of them.

The asymmetry runs the other way for a claim that was never made. A capital allowance left unclaimed is treated as deferred: the cost is still there as tax written down value and can be claimed from a later year, on the method’s own terms. Under the working-life method the initial allowance belongs to the year of purchase, and if it was not claimed then the annual allowance is computed on the full cost instead, so nothing is forfeited. The renovation deduction has no such grace. IRAS states that expenditure not claimed in the Year of Assessment it was incurred does not qualify in later years, and that it cannot be deferred. The route back is a correction of that year’s return rather than a claim in a later one: an objection within two months of the Notice of Assessment, or an application for relief for an error or mistake under section 93A, which has to be made within four years after the end of the Year of Assessment in which the assessment was raised. The four years are a time limit, not an entitlement: relief is subject to the section’s conditions and IRAS’s decision, and we know of no published IRAS decision on an omitted renovation claim. Whether relief is given is a judgement for the practitioner making the application, which is a reason to get the first return right.

IN ORDER

Six steps, starting with the invoice.

Common questions.