What happens if i have only depreciated an item by 3 years, and it is knackered and needs to be chucked out. Can I claim the balancing 5/8ths depreciation in one lump ?
Re: Depreciation - Getting rid of items not fully dereciated
if the asset is redundant and is to be sold/written off the books.. then the difference between the cost less depreciation charged to date less any sale proceeds is charged to the profit & loss in the year of disposal.
Re: Depreciation - Getting rid of items not fully dereciated
Niallymac said:
What happens if i have only depreciated an item by 3 years, and it is knackered and needs to be chucked out. Can I claim the balancing 5/8ths depreciation in one lump ?
Are you talking about capital allowances tax issue or an accounting issue?
As some people confuse interchange capital allowances and depreciation!
If it is a capital allowances issue you may be able to claim what is called a balancing allowance
Bascially you take your proceeds received (if any) and compare it to the tax written down value (the cost less c/a claimed) the difference is a balancing adjustment or additional capital allowances, the reverse is a balancing charge and a clawback of capital allowances received
If its an accounting issue it will be a fixed asset diposal and the net book value - undepreciated will be written off as a "loss on diposal"
Ok, if they are being scrapped, wth no value, you may claim, in this year, the amount not claimed through capital allowances system this is called a balancing allowance or effectively the amount left unclaimed
The comp will look like this
Proceeds received on sale/scrappage
Less tax written down valaue
Equals balancing allowance for offset against renatal income