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Explain It Like I'm 5: Tax Relief

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Comments

  • John_Pierpoint
    John_Pierpoint Posts: 8,396 Forumite
    Part of the Furniture 1,000 Posts
    http://www.hmrc.gov.uk/manuals/camanual/CA10040.htm

    At your level of business, you don't need to be an expert in depreciation of declining balances.
  • Pennywise
    Pennywise Posts: 13,468 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    HMRC have detailed rules about what you can set against tax regarding depreciation of assets. Very simply, if HMRC say the allowed depreciation for your computer is 20% per year:

    Wrong, I'm afraid. Depreciation is an accounting term and ignored/added back for tax purposes. Any business is free to choose whatever depreciation they like in their accounts - it doesn't affect tax.

    HMRC provide tax relief on asset purchases via their capital allowances rules which are completely different to depreciation and net book values in accounts.

    At the moment there's 100% annual investment capital allowance in year of purchase, so you'd get full tax relief in year of purchase for a hypothetical computer.
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