A registered business in Nigeria will undoubtedly employ fixed assets to generate income. Revenue generated by any company is also expected to result from the use of assets, which, in turn, benefits the company. In Accounting, this is achieved by taking the total current liabilities, in form of short-term financial obligations from the total assets put to use while we ascertain the profit generated by these assets by taking the Net income against the Average Assets to determine the actual revenue flow into the Company which is as a result of the Capital employed.

Specifically, This Capital employed is expected to flow directly to the Company’s retained earnings for the period. The Industrial Inspection Division (IID) of the Federal Ministry of Industry, Trade and Investment (FMTI) has the primary responsibility to inspect, value, and certify this capital expenditure incurred by the Company. On this note, every organization that intends to incur capital expenditure, (in this case, purchase a fixed asset) of N500,000 or more is expected to notify and inform the Industrial Inspection Division (IID) of the Federal Ministry of Industry, Trade and Investment (FMTI). The agency has the mandate to issue a CERTIFICATE OF ACCEPTANCE OF FIXED ASSETS (CAFA) certifying the value of the capital expenditure after satisfactorily inspecting, certifying, and verifying the fixed asset.

The Industrial Inspection Division (IID) of the Federal Ministry of Industry, Trade and Investment (FMTI) is backed up by the Industrial Inspectorate Act Cap I8, Laws of the Federation of Nigeria LFN 2007 (the Act). The Act is the legal backing legislating the IID to investigate and inspect the affairs of the Company’s investment and other related matters. The Agency is saddled with the responsibilities to ensure the efficient valuation of the capital expenditure amongst other government agencies who in the course of their duties need to validate the values of the fixed asset employed by all Companies, The Federal Inland Revenue Service is one of the other government agencies mentioned in the act who needs to validate the value of the capital expenditure employed.

The Federal Inland Revenue Service (“the Service) through their memo of May 9th,2022 has notified all Companies that enjoyed capital allowance on Qualifying Capital Expenditure (QCE) of N500,000 and above between 2016 and 2021 year of assessments which will be on the 2015 – 2020 account to submit the Certificate(s) of acceptance issued by the IID to their respective tax offices on or before 31st October 2022. The FIRS had threatened to withdraw the capital allowances enjoyed for the relevant years of assessment by any company that has failed to comply with the notice (The Memo) and be subjected to consequential additional tax liability accordingly. The Federal Inland Revenue Service had also communicated through their memo that, henceforth, every company shall provide Certificate(s) of Acceptance concerning the Fixed asset employed which is of N500,000 and above in each year of assessment.

The memo implies that All Companies are to provide their Certificate of Acceptance (CAFA) obtained for the Qualified Capital Expenditure employed for the period covering 2016 – 2021 years of assessment and also provide the CAFA for each year of assessment going forward. In essence, Any Company that has failed to process the CAFA for the previous years which falls under the year captured by FIRS (2016-2021 YOA) is expected to start processing their backlog acceptance certificate to enable the FIRS to allow their capital allowance enjoyed for the period mentioned above.

We believe that the FIRS has come to an understanding that the Certificate of Acceptance issued by the IID is the prerequisite to allowing the Capital allowance claimed or claimable for a particular period, this is an awakening call to all Companies who have purchased an asset that is of the value of N500,000 and above (QCE) to process and obtain their Certificate of acceptance for the Qualified capital expenditure with the IID for a given period.

The undersigned is available to offer any assistance should you require any help in obtaining your Certificate of acceptance.

Thank you.

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