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bigduckontax
bigduckontax, Accountant
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Does vehicle and office equipment depreciation is OK as

Customer Question

Hi, does vehicle and office equipment depreciation is OK as business expenses for tax purpose. I am limited company. Thanks.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.
No, depreciation is not allowable against Corporation Tax (CT). Indeed it is not a concept acceptable under the UK taxation regime at all. For tax purposes, if included in accounts as indeed it is often is, it is added back to increase the profit or reduce the loss in the CT computation.
In its place, for tax purposes, are Capital Allowances (CAs). The Gov UK has the following guidance here:
https://www.gov.uk/capital-allowances/overview
For office equipment at present CAs are relatively simple, there is an Annual Investment Allowance of 100% so the whole shooting match can be written off for tax purposes in the year of purchase. Vehicles are more complex and only entitled to an annual writing down allowance (WDA) or a first year allowance (FYA) which can, in certain circumstances be 100%. The rates are dependent upon emissions and are as follows:
100% FYA for electric cars or if CO2 emissions are 75g/km or lower.
18% WDA if CO2 emissions exceed 75g/km but do not exceed 130g/km
8% WDA if CO2 emissions exceed 130g/km
Vans or lorries come under the same rules as office equipment. An interesting point, a colleague of mine bought a camper van which he used in his business; it was classified as a van not a car!
Full details of cars can be found here [source Ross MArtin Tax Consultancy}:
http://www.rossmartin.co.uk/capital-allowances-75082/315-capital-allowances-rates-and-allowances
I do hope I have shed some light on your companies position viz a viz the items acquired for business purposes by your company. One small point to remember is that if the WDA falls to 1K then it can be written off immediately.
.
Customer: replied 2 years ago.

Would it be different if I am a sole trader?

Expert:  bigduckontax replied 2 years ago.
No, exactly the same.
bigduckontax and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

so it seems there is no purpose to calculate depreciation at all...

Expert:  bigduckontax replied 2 years ago.
The traditional purpose of depreciation was to write off the value of an asset over its expected life to provide a true and fair view of an organisations position at each year end.
Capital Allowance are more politically and expansionist minded these days. These 100% write offs are to encourage business investment and expansion as well as aiding small businesses.
Customer: replied 2 years ago.

OK. so whats happening with write offs , can they be sold or gifted to someone?

Expert:  bigduckontax replied 2 years ago.
If you dispose of an asset subject to CAs you create a balancing charge, the difference between the CAs claimed and the sum received. The balancing charge reduces the CAs available in that year to offset gains or losses.
Expert:  bigduckontax replied 2 years ago.
Thank you for your support.