Depreciation of Plant & Machinery (computers)

[JW1]

I am in the process of striking off a limited company that I set up in June 2004 to exploit an idea that turned out not to be feasible.

The only items on its balance sheet are £1K of computers (assets) and a £2K directors loan (liability) from me.

I don't expect to get my loan back but, unfortunately, I have not claimed any depreciation on the PC's in any accounts to date. In reality they are probably worth £250 now - not £1K.

Is it possible for me to depreciate them down to this level in the accounts in one-hit, given that I haven't depreciated them at all for 3 years? I don't want £1K carried forwards for tax purposes.

Thanks,

JW

[jpcentral]

You can pretty well do what you want with depreciation; that is at the discretion of the directors. What you can't do is vary the rate of Capital Allowances which is the relevant calculation for tax. The rate for CA is 25% pa after the first year.

If the equipment is only worth £250, why don't you sell it (possibly to yourself) and create a loss?

John Perry
Central Business Services
Loughborough
www.centralbusiness.co.uk

[JW1]

Thanks for your reply John.

I haven't yet submitted the 2006/7 accounts but as I understand it you're saying that because I didn't submit any CA for 2004/5 and 2005/6, I can only submit 25% for 2006/7. In effect I've lost out on the CA for the first 2 years of the company's life?

With regards to selling the equipment to myself, could I instead journal the whole book value against the outstanding directors loan? ie. Reduce the £2K directors loan by £1K?

Regards

JW

[Bob Jones]

You are not required to claim capital allowances every year. When the business ceases the final CA computation is based on the market value - so if you bought for £1000 and the market value is £250 you can claim £750 in the final year.

[JW1]

Ok, that's great. Thanks very much for the guidance.

Regards,

JW