Depreciation rates

[di35whistles]

I understood that equipment is depreciated at 15% and computers at 25%, but a friend was told 40% for the year of purchase and 25% thereafter.
Can someone please clarify this for me?
Many thanks.
Di

[taxattack]

We need to distinguish depreciation from capital allowances. Depreciation is an accountancy concept, used to spread the cost of an asset over its useful life in the business. The rate used will depend therefore on an estimate of that useful life, so computers might be depreciated at 25% or 33%, or at a lower rate if their useful life is expected to be longer. This might be on a straight line basis (same amount each year) or reducing balance (25% of 100%, then 25% of 75% and so on). It depends on the asset, and there is an element of choice and subjectivity.
Because of that subjectivity, depreciation is not allowable for tax purposes, and is replaced by capital allowances, which is what your friend was referring to. First year allowance for plant & machinery in 2006-7 (small businesses) is 50% - was 40% last year - and 25% thereafter, on the reducing balance basis. Other rates apply for various different assets. Hope that helps.

[di35whistles]

Thanks for that, and I was meaning capital allowances for tax purposes.
For further clarification the equipment is medical type as used by a physio, and a new computer.
Thank you.

[Daniya]

Usually computers, etc are written off over three years, but there are exception where computer capital allowances can be reclaimed over one year.

Discuss it with your accountant, if this is suitable for you or not.
regards
Rana