Change of HMRC's qualification of assets' depreciation for Corp Tax ...

Unless I'm completely mis-reading that, I think you've got some confusion going on there DickM.

Accounting profit (i.e. including a provision for depreciation) is only the starting point for tax calculations.

'Depreciation' per the accounts is not a tax allowable expense, so in computing profits chargeable to CT you would have to add back any depreciation expenses in the accounting profit (i.e whatever he'd provided on the new PC in this year's accounts).

HMRC then allow 'capital allowances' instead of depreciation at their own pre-determined rate on most capital items (plant, office equipment, motor vehicles etc but not buildings - although I'm generalising ). From April 2012 this is at a rate of 18% (reducing balance), previously 20%. You would then deduct any capital allowances you're allowed off the calculation of 'profits' (i.e. accounting profit + depreciation charged in the accounts - capital allowances).

To confuse matters further, you often also get additional allowances in the year of purchase of assets, most commonly a ?25k 'annual investment allowance' for all assets but also 100% first year allowances for some 'eco-friendly' stuff.

So the allowances are nothing new - they have just allowed additional rates for 'green' stuff.

I hope that clears up a few things for you - however I would suggest maybe the new director would be best to speak to an accountant to make sure they're not missing out on other things?

Source: http://www.ukbusinessforums.co.uk/forums/showthread.php?t=266794

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