Deprecation of assets

[SimonMac]

Trying to work out the CT600 this year, the only asset that I have bought is a laptop for £911, is there a guide that show's what the deprecation should be? Or do I go to the likes of eBay and check the cost of a similar spec second hand laptop?

[Clare@InTouch]

Trying to work out the CT600 this year, the only asset that I have bought is a laptop for £911, is there a guide that show's what the deprecation should be? Or do I go to the likes of eBay and check the cost of a similar spec second hand laptop?

Depreciation is something that's done in the accounts, and it's usual to have either 33.3% or 25%. That's either straight line (so the same each each year) or reducing balance (a set percentage of the remaining value each year). Depreciation is added back in the tax computation as it's not allowable.

The CT600 would then show 100% Annual Investment Allowance.

[Scrag Meister]

Depreciation is something that's done in the accounts, and it's usual to have either 33.3% or 25%. That's either straight line (so the same each each year) or reducing balance (a set percentage of the remaining value each year). Depreciation is added back in the tax computation as it's not allowable.

The CT600 would then show 100% Annual Investment Allowance.

So when does the asset's value reach zero on "reducing balance" basis. Surely you end up with an asset that has a value, however small, ad infinitum. I've noticed this with my laptop, can it still have a value come 2020.

[Sockpuppet]

So when does the asset's value reach zero on "reducing balance" basis. Surely you end up with an asset that has a value, however small, ad infinitum. I've noticed this with my laptop, can it still have a value come 2020.

When it small enough to be written off or the item has no business value.

E.g. £1000 laptop at 33% a year would be.

Y0: £1000
Y1 : £670
Y2: £449
Y3: £300
Y4: £201
Y5: £0 - I'd probably just write it off when its under £200.

[Clare@InTouch]

So when does the asset's value reach zero on "reducing balance" basis. Surely you end up with an asset that has a value, however small, ad infinitum. I've noticed this with my laptop, can it still have a value come 2020.

Absolutely, then you end up with assets worth £1 and no one remembers what they are! This is one of the reasons why we wouldn't even capitalise something under £750 in the first place - it gets written off for tax in year one, and the pace of technology likely means that a computer for that value won't be worth much in a year anyway.

[JamJarST]

Absolutely, then you end up with assets worth £1 and no one remembers what they are! This is one of the reasons why we wouldn't even capitalise something under £750 in the first place - it gets written off for tax in year one, and the pace of technology likely means that a computer for that value won't be worth much in a year anyway.

Seeing as you can claim CT600 annual investment allowance on most of what we as one man contractors buy, is there any real advantage to have financial accounts that depreciate them? Seem like unnecessary admin for a small business like mine?

[VectraMan]

I bought a laptop 4 and a bit years ago that's now depreciated to nothing for accounts purposes. If I were to sell it, probably only £50-£100, do I still need to account for that as a sale? Or does depreciated mean I can just say that it's mine and not the company's and nobody will ever care?

[Clare@InTouch]

Seeing as you can claim CT600 annual investment allowance on most of what we as one man contractors buy, is there any real advantage to have financial accounts that depreciate them? Seem like unnecessary admin for a small business like mine?

There's no real advantage, but then there's no disadvantage either apart from the depreciation calculation (which takes about 30 seconds). The idea is that assets are capitalised to show their ongoing use to the business, and then depreciated across their useful economic lives.

[Clare@InTouch]

I bought a laptop 4 and a bit years ago that's now depreciated to nothing for accounts purposes. If I were to sell it, probably only £50-£100, do I still need to account for that as a sale? Or does depreciated mean I can just say that it's mine and not the company's and nobody will ever care?

It means you should account for it as a sale, or sell it to yourself for market value - if your permi employer had an old computer you couldn't just sell it and keep the money!

[JamJarST]

There's no real advantage, but then there's no disadvantage either apart from the depreciation calculation (which takes about 30 seconds). The idea is that assets are capitalised to show their ongoing use to the business, and then depreciated across their useful economic lives.

Thanks Clare, my asset register is so small that I am inclined to just stay in line with the tax valuation myself. Makes no real difference to my balance sheet, either I have a higher net asset balance or a higher retained income.