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  • FIRST POST
    • Skag
    • By Skag 9th May 18, 1:22 PM
    • 237Posts
    • 29Thanks
    Skag
    UK Ltd property depreciation
    • #1
    • 9th May 18, 1:22 PM
    UK Ltd property depreciation 9th May 18 at 1:22 PM
    Does property depreciation over a number of years apply in UK Ltd that own properties? (BTL properties).

    This is for the purposes of offsetting earnings, and tax paid.

    I know in the US and other countries it does.
Page 1
    • ThePants999
    • By ThePants999 9th May 18, 1:33 PM
    • 1,257 Posts
    • 1,582 Thanks
    ThePants999
    • #2
    • 9th May 18, 1:33 PM
    • #2
    • 9th May 18, 1:33 PM
    ...but properties tend to appreciate, not depreciate? With exceptions, of course.
    • westernpromise
    • By westernpromise 9th May 18, 1:36 PM
    • 4,263 Posts
    • 5,542 Thanks
    westernpromise
    • #3
    • 9th May 18, 1:36 PM
    • #3
    • 9th May 18, 1:36 PM
    Does property depreciation over a number of years apply in UK Ltd that own properties? (BTL properties).

    This is for the purposes of offsetting earnings, and tax paid.

    I know in the US and other countries it does.
    Originally posted by Skag
    No. You don't get to depreciate.
    Buying a house, if you believe the market has a way to fall, or if you are paying sill asking prices ( like some sheeple ) or if you are buying in London, is now a massive financial gamble!!!!! - June 8, 2012 by TheCountOfNowhere
    • 00ec25
    • By 00ec25 9th May 18, 1:50 PM
    • 6,962 Posts
    • 6,649 Thanks
    00ec25
    • #4
    • 9th May 18, 1:50 PM
    • #4
    • 9th May 18, 1:50 PM
    no
    a key difference between UK accounting principles and other countries is that you never depreciate real estate in the UK and any attempt to do so would be disallowed for UK corporation tax purposes
    • westernpromise
    • By westernpromise 9th May 18, 2:18 PM
    • 4,263 Posts
    • 5,542 Thanks
    westernpromise
    • #5
    • 9th May 18, 2:18 PM
    • #5
    • 9th May 18, 2:18 PM
    This is one of the often-overlooked differences between the UK and other rental markets in Europe, such as Germany. Over there, blocks of flats are bought by corporates, and are let out on long tenancies, but incomplete - so the tenant may have to put a kitchen in. The rents and the depreciation then substantially cancel each other out so that letting generates cash but little reportable taxable profit.

    Anyone who wants that model for the UK should perhaps be careful what they wish for.
    Buying a house, if you believe the market has a way to fall, or if you are paying sill asking prices ( like some sheeple ) or if you are buying in London, is now a massive financial gamble!!!!! - June 8, 2012 by TheCountOfNowhere
    • Skag
    • By Skag 10th May 18, 8:14 AM
    • 237 Posts
    • 29 Thanks
    Skag
    • #6
    • 10th May 18, 8:14 AM
    • #6
    • 10th May 18, 8:14 AM
    So other countries' companies can be more tax efficient due to depreciation of fixed assets, as opposed to the UK.

    Is there anything equivalent in the UK? I read "capital allowances" but wasn't sure if that's the same thing.
    • 00ec25
    • By 00ec25 10th May 18, 1:55 PM
    • 6,962 Posts
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    00ec25
    • #7
    • 10th May 18, 1:55 PM
    • #7
    • 10th May 18, 1:55 PM
    So other countries' companies can be more tax efficient due to depreciation of fixed assets, as opposed to the UK.

    Is there anything equivalent in the UK? I read "capital allowances" but wasn't sure if that's the same thing.
    Originally posted by Skag
    you have been told that you cannot do this - accept that fact or pay an accountant to confirm it for you

    capital allowances are not available on real estate property - they are available on other things
    https://www.gov.uk/capital-allowances/what-you-can-claim-on
    • kinger101
    • By kinger101 10th May 18, 7:00 PM
    • 4,466 Posts
    • 6,208 Thanks
    kinger101
    • #8
    • 10th May 18, 7:00 PM
    • #8
    • 10th May 18, 7:00 PM
    So other countries' companies can be more tax efficient due to depreciation of fixed assets, as opposed to the UK.

    Is there anything equivalent in the UK? I read "capital allowances" but wasn't sure if that's the same thing.
    Originally posted by Skag
    Depreciation is never allowable for tax purposes. Capital allowances replace these. However, as has already been explained, you cannot claim CA on residential dwellings or the fixtures and fittings therein.

    There is something called "replacement relief" to cover replacement of fixtures and fittings. If you cannot understand how it works, employ and accountant.
    • Skag
    • By Skag 10th May 18, 8:36 PM
    • 237 Posts
    • 29 Thanks
    Skag
    • #9
    • 10th May 18, 8:36 PM
    • #9
    • 10th May 18, 8:36 PM
    accept that fact or pay an accountant to confirm it for you
    Originally posted by 00ec25
    Did I mention anywhere that I don't accept it?
    • Skag
    • By Skag 10th May 18, 8:40 PM
    • 237 Posts
    • 29 Thanks
    Skag
    Thanks for all your replies and explanations so far.
    One thing that some people fail to understand in forums is that people don't come here to find experts; maybe they will. They come here to get quick answers by people who may have prior knowledge to subjects and can guide them through.
    I'm not looking for accounting advice here, contrary to what is believed, I was looking for a quick answer, and got it. If I need to get an accountant, I will.
    • bowlhead99
    • By bowlhead99 10th May 18, 9:14 PM
    • 8,234 Posts
    • 15,017 Thanks
    bowlhead99
    Did I mention anywhere that I don't accept it?
    Originally posted by Skag
    'Can you depreciate property and offset it for tax? You can in other countries?'

    'No, we don't allow that under tax rules in the UK'

    'Well, I can in other countries. Is there something like it so I can do it in the UK?'

    'No, really. We don't allow that under tax rules in the UK. Accept it...'

    'Did I say I didn't accept it ROFL'

    Yeah, you kinda didn't seem to accept it first time around

    Basically in the UK, "depreciation" is the accounting terminology for knocking down the value of your fixed assets each year and putting it as a charge through your profit and loss account /income statement as you go along.

    Whereas a "capital allowance" is the tax terminology for the amount that you are allowed by HMRC to recognise as a deduction from your gross profits when computing your taxable income, to reflect the fact that the capital value of your assets reduces over time as you utilise the assets.

    There can be a big disconnect between what you might think you should recognise as "depreciation" of certain assets for accounting purposes and what HMRC will allow as a reduction of their capital value for tax, so capital allowances and the resulting net profit for tax are often different from your depreciation and profit you might like to have in your Companies House filed accounts (assuming you're a corporation).

    If your business has a car or a van or factory machinery that it uses a lot, HMRC accept that it's not going to last forever and you're genuinely eroding it's economic value the more you use it, and the available capital allowances ensure that you don't pay a crazy amount of tax on gross profits that don't really translate to real bankable profits over the long term. But with a residential property properly maintained, it's not going to decline to zero value over three or five or ten or 25 years, so you can't get a capital allowance to arbitrarily reduce the value of the asset each year. Because you're not actually 'using up' the foundations, walls, roof or location of the property simply by occupying it.
    Last edited by bowlhead99; 10-05-2018 at 9:16 PM.
    • 00ec25
    • By 00ec25 10th May 18, 10:57 PM
    • 6,962 Posts
    • 6,649 Thanks
    00ec25
    Did I mention anywhere that I don't accept it?
    Originally posted by Skag
    You got your "quick answer", yet you still repeated the question whilst looking for more details in the apparent hope the answer would be different second time round if you threw in the buzz word "capital allowance". That does not stack up with the statement:
    I'm not looking for accounting advice here,
    if you want to understand how UK tax works then you will need to do a lot more research than it is reasonable to expect people to write out for you in a few lines on a forum
    Last edited by 00ec25; 10-05-2018 at 11:02 PM.
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