Computer Expense or Depreciation?

Hi All,

It's and old question but still not clear for me.

I asked arround and few people said that I cannot put my Computer as expense (which would be great as it's and expensive one). They said I must depreciate it over years. Let's say 2 years.
What happens after 2 years? Should I put it to bin?

And next thing is how technically should I do it (in quick books) for example, if I will use Depreciation? I've heard it needs to be done in December.

-Soletrader
- Vat registered
- Computer is used in the business as a main tool (designer)

Thanks for any suggestions!

For accounting purposes you will capitalise as a fixed asset and depreciate over estimated useful life.

For tax you will claim Capital allowance of 12.5% per annum

Hi Marcin,

I'm in a similar situation to you and was given the same advice that computers are seen as assets of a business, since they have lasting use, rather than day to day expenses. The revenue guides confirm this.

You can treat day to day stuff as expenses in Quickbooks, but you should record your computer as an asset, which means that it won't add on to your expenses.

Then, when you are doing your tax return in October/November each year, there is a section called Capital Allowances. You are allowed to claim 1/8 of the cost of the computer here for 8 years.

If as is likely, it doesn't last 8 years, you can claim any remaining allowance when filing accounts for the year it went kaput. In Quickbooks you would reduce your assets in that year to reflect the computer being gone. Alternatively, you could record a depreciation expense of 1/8 each year.

Whether you actually depreciate your computer in your accounts is up to you really - it's just an accounting technique. From a tax point of view, the only important thing is not to include the full cost in your expenses in your tax return, and to claim for 1/8 cost each year in the Capital Allowances box instead.

Thanks FIZZY. Great answer. You're a great help!