Firstly whether our client will be able to claim for the additional 50% (100% of depreciation already included in income statement) of the 150% allowance in terms of section 11(d) for a computer server. Our client is directly involved in the development
Important:
This answer is based on tax law year ending 28 February 2019.
Answer:
The section 11D(2) requirement is that the deduction is in respect of “expenditure actually incurred by that taxpayer directly and solely in respect of the carrying on of research and development in the Republic if—
(i) that expenditure is incurred in the production of income;
(ii) that expenditure is incurred in the carrying on of any trade;
(iii) that research and development is approved in terms of subsection (9); and
(iv) that expenditure is incurred on or after the date of receipt of the application by the Department of Science and Technology for approval of that research and development in terms of subsection (9).”
The term “research and development” is defined in section 11D and requires a “systematic investigative or systematic experimental activities of which the result is uncertain for the purpose of discovering non-obvious scientific or technological knowledge or creating or developing” the items listed in the section. It also includes making a significant and innovative improvement (for defined purposes) to an invention, functional design, computer program or knowledge. (We didn’t believe that paragraph (d) ID applicable.
We don’t know exactly what you mean with “running through the income statement”. Please remember that, in terms of section 23B(3), no deduction under section 11(a) (the salary) is possible.