Equipment Depreciation Question

[Rob Hornett]

Hi Ladies & Gents

I have a question about how deprication works, what is involved as far as saws, chippers, lawn mowers and stump grinders go. All of the equipment purchased from new.

 

Can you put the whole purchase cost against your expenses then next year put what ever the HMRC rate of depreciation against next year, then repeat each of the following years untill the item has run out of years (say five years) or is it something completely different and I have got the wrong end of the stick..?

Thanks for any advice

Rob H

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We judge ourselves by what we feel capable of doing, while others judge us by what we have already done.

Henry Wadsworth Longfellow (1807 - 1882)

Edited May 3, 2012 by Rob Hornett
spelling

[niftysteve]

as far as i know when you buy somthing like a saw it is classed as an asset to the business worth £xxx in the first year then the depreciation is deducted each year eventually making the saw worth nothing on paper. if you sell the saw after this time it could be classed as income to the business therefore you may have to pay tax on the amount you sell it for.

hopefully i have explained correctly imsure someone else may post soon

[Rob Hornett]

Thanks niftysteve,

I was hoping it was something like that, so can I put the full cost against my expenses this year then work on the depreciation for next year according to the HMRC rates for this type of asset

Regards

Rob H

___________________________________________________________________________

We judge ourselves by what we feel capable of doing, while others judge us by what we have already done.

Henry Wadsworth Longfellow (1807 - 1882)

[WorcsWuss]

There's some great and easily understood advice on this on the HMRC website explaining capital allowances and writing off.

I can't remember exactly how it works but the sort of stuff you're talking about can all go in your allowances in that tax year [assuming you pay for it up front] and can then be written down every year [think it's 40% each tax year, although there are 2 different depreciation formulas] until it's written off the books as an asset and can be scrapped.

But also correct in saying that an asset which has been written off the books would generate or be classed as taxable income when sold.

If you purchase on finance it doesn't go in capex [although the deposit might] and goes in 'annual maintenance allowances' or something or other....

Search the HMRC site, much better advice than me...!

[Paul Jenks]

You used to be able to write off 50% against profits in the first year followed by, i think, a 3 year tail down to a book value of £1. You could also write off computer equipment in one year. Because it's an asset it sits on your balance sheet and without the depreciation you would pay tax on it.

My business director, office manager and accountant do all that so I don't even have a working knowledge of it. Bores the tits off me. Show me which tree to cut.

[Big Bolt]

no you cant put the full cost against expenses this year and then have a depreciation over a set amount of years , that would be claiming for it twice, as paul says a percentage of say 50% then a yearly drop until it's gone . any plant i get in over £350 I do this way with some kit high use and small saw's , depreciation is quiker 3 years tractors ,4x4 6 years or unless it's sold or scrapped

[likeitorlumpit]

Some kit you can argue is 1 year gear and just treat it like materials.

Such as chains/bars/consumables/small hand tools.

Least thats how I see it- what would be the point in depreciating a spade over 5 years- just an accounting PITA

I think you would have more investment in business if all kit was depreciated over 1 year as you would buy kit to reduce your tax liability and this would mean businesses would have more new kit. But thats the taxman for you:sneaky2:

[Rupe]

I believe with saws and small stuff you can put 100% in the first year and thats it done, no need to worry about depreciation, but not with vehicles chippers etc.

 

Not sure what the amount has to be to class as small stuff.

 

for example, if I buy an new MS200, it can be classed as repairs to my old one and just written off in one year, same with ropes etc.

 

As far as I now, my accountant only works out depreciation for my chipper and truck and then maybe the larger saws that really are an asset rather than just a cost.

[Rupe]

BTW, thats why its actually best to buy chippers on the monthly rather than paying in full up front.

 

If you pay £13K+ in one go for a chipper you will only get about 5k tax relief that year. might as well keep the 13K in the bank.

[niftysteve]

ive just found the schedule forwhat my accountant has as fixed assets for 2011

motor vehicles 25% per year depreciation

equipment (welders trailers storage container) 15% per year

office equipment 15% per year