Section 13 or s13 of the Income Tax Act refers to the tax advantages that property investors can claim on their buy-to-let property. Section 13quin or s13quin refers to buildings such as office buildings, retail stores and warehouses used for trade. This section of the Income Tax Act will grant the taxpayer an allowance for new and unused buildings and required improvements during the trade.

Let’s closely consider the differences between these sections.

Section 13

This section pertains to manufacturing or research and development buildings. If used for research and development, it only applies to buildings used for this purpose after 1 October 2012. The building owner can claim the allowance, and the building must be wholly or mainly used for the taxpayer’s trade.

Allowance under Section 13:

• Starts when the building is brought into use for the company’s trade.
• Is claimable on buildings constructed by the taxpayer.
• Is claimable if the building is brand new and has never been used and purchased by the taxpayer.
• Is claimable on improvements.
• Is calculated based on cost.
• Stops when the building is no longer mainly used for the company’s trade or when sold.
• Excludes the clearing and levelling of the site in preparation for construction, excavations, external paving and fencing. It also excludes the cost of the land.
• Is calculated depending on when the building was erected, or improvements commenced – currently 5% of cost.
• Is claimable on a second-hand building only if the previous owner used it for manufacturing and was eligible for the allowance.
• Excludes an apportionment of allowance for part of the year.

Section 13quin

This section pertains to a commercial building such as an office block and does not apply to any part used for residential letting. It only applies to buildings or improvements contracted for after 1 April 2007 and where construction started after this date. The building owner can claim the allowance, and the building must be wholly or mainly used for the taxpayer’s trade.

Allowance under Section 13quin:

• Starts when the building is brought into use for the company’s trade.
• Is claimable on buildings constructed by the taxpayer.
• Is claimable if the building is brand new and has never been used and purchased by the taxpayer.
• Is claimable on improvements.
• Is calculated based on lower of cost or market value
• Stops when the building is no longer mainly used for the company’s trade or when sold.
• Is calculated at various percentage rates depending on the construction cost of the building, the purchase price of the whole building, the purchase price of part of the building, and the purchase price of part of the building.
• Is not claimable on second-hand buildings.
• Excludes an apportionment of allowance for part of the year.

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