Adjusted tax computation

Quick one! I'm just doing up my tax return for 2008, i had a show room which i fitted out and in short closed it in 2008 as it wasnt earning its keep, the fit out cost about €15k, am i correct to write this off to the P&L? The accountant was showing it on the balance sheet as freehold premises. When i'm calculating my adjusted tax comp would it be an add back like depreciaiton or is it allowed for tax pouposes? Tanx in advance

Cmax said:

Quick one! I'm just doing up my tax return for 2008, i had a show room which i fitted out and in short closed it in 2008 as it wasnt earning its keep, the fit out cost about €15k, am i correct to write this off to the P&L? The accountant was showing it on the balance sheet as freehold premises. When i'm calculating my adjusted tax comp would it be an add back like depreciaiton or is it allowed for tax pouposes? Tanx in advance

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For adjusted profit comp- normally add back the depreciation.

In the above situation you have to give more details for correct tax treatment

when was €15k incurred.
How much capital allowances have already being cliamed
How much depreciation already deducted
when closing, did you sell on any items making up the 15k
may be profit/loss on disposal to be included in pl and adjusted profit comp

may also be balancing allowance/charge computation to be done

you might be better to get your accountant to do final accounts and tax return as he is familar with past years

Hi Papervalue,

Most of the expenditure was incurred in previous year accounts and the accountant never claimed capital allowances on this expenditure. None of what was in the shop could have been sold on, they were all small versions of products for display purposes only, i have all receipts for this expenditure and all the products are in a corner in the workshop never to be used again!!! So no disposal /gain/loss situation to be calc. Cost just to be wrote off

A general principle when claiming capital allowances is that the relevant asset must be in use by the business on the last day of the accounting period.

It's not entirely clear that this applies here- if the room is being used to store materials you might be able to claim allowances.

Be aware that it is more tax efficient to be able to write off an expense payment in full in the year it is incurred rather than capitalise it and write it off over 8 years- expensing the costs, if permitted, would reduce your tax.

I'd suggest that you talk with your accountant.