After having a conversation on the AAT forum, I've come here for a dose of reality. Please tell me I'm not a total idiot.
Here's how the conversation went: (mine in red)
We were talking about a desk I had seen in someone's accounts being depreciated at £2 a year.
So you wouldn't bother to depreciate that asset? What about a) the cumulative effect of non-depreciation of an asset and/or b) the aggregate effect of the non-depreciation of a number of assets - that could easily be material.
no Andrew, I would never depreciate a desk at £2 a year. It's like taking a £10 waste paper bin and depreciating it at £2 a year because it's good for 5 year. Just expense the thing.
So you'd expense a non current asset that had a potential quite long useful life?
yes
I don't agree with you Kris. Your approach does NOT work for tax purposes in any case.
seriously, you think that every fixed asset should be capitalised?
Yes. That's the point of fixed assets
Ok, so you buy a £60 desk, with a life span of 10 years, you're capitalising that?
Yes.
surely the fixed asset register is going to be full of staplers and hole punches?
Ah, I see! We shouldn't capitalise stuff to prevent the fixed asset register getting too big!
NOT FOR TAX PURPOSES. EVER.
and yes for tax purposes I have, and do expense low cost fixed assets
Well the law says you can't.
This is getting slightly crazy.
s.33 ITTOIA 2005. "No deduction is allowed for items of a capital nature" HOWEVER SMALL!
So, am I nuts?
-- Edited by kjmcculloch83 on Friday 1st of April 2016 01:17:14 PM
I don't think you are mad, maybe that's because I agree with you. Lots of businesses chose a level at which to treat something as a fixed asset, it all depends on the size of business. Some clients it is £500.
I know in theory they are right but in practice Im not sure anyone would do this
I think this is one of the areas where accountancy and tax are treated differently. In the accounts you can use materiality and therefore those staplers aren't going to be capitalised (Like Alison suggests, I wouldn't capitalise anything below £500), for tax you may well have to claim wda's but for most small businesses they aren't going to breach AIA so no point (in my mind) going to the extra trouble. I can't believe the tax man is going to quibble over this if there is no extra tax to be found. I know Kris and I lean towards pragmatism more than say Shaun, Jo and Bill but I doubt that they would capitalise a stapler...now a desk?....
Edited as missed the word 'tax' out!
-- Edited by RobH on Friday 1st of April 2016 01:33:08 PM
I thing I'm maybe a bit more pragmatic too Rob. The initial conversation was around a client with a £60 desk that was being depreciated at £2 a year. I just thought it was madness on stilts.
I agree with Rob on this one in that there is a difference between accounting and tax treatment.
Through the books I would expense a £60 desk but through the tax return I would add back to profit and take to the AIA.
Conversely some low value items used over more than one period I would consider as consumables. i.e. cables, staplers, calculators, etc. so despite meeting the criteria of being a non current asset they are never going to be capitalised and depreciated or even expensed and added back to the tax calculation.
Ask yourself... Is a stapler an asset or stationery? Personally I would consider it stationery.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I'd go with expense, forget about the depreciation. Wouldn't capitalise, too immaterial - which leaves it deductible. If it were a £1000 desk, I'd do the opposite
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Johnny - Owner of an overly-active keyboard.
A man who can read, yet doesn't, is in no way wiser than a man who can't.
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I hope that everybody treats their stapler as an asset and more importantly treats their staples as stock at year end :).
Regards Gordon
Of course, and I always load my staples from the back so that I adhere to the FIFO inventory principle.
At period end I hope that you categorise the staples already loaded into the stapler as WIP!
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Heh. That reminds me... zillions of years ago (and it might even have been on 1st April - but I can't be certain.)
Basically a new lad started at the office I was working at, and was sent to the office to get his stationery - and I instructed him to weigh the pens he picked up so that we could track the amount of ink used when we weighed them again during a stock check.
Which he did. He used a piece of analysis paper - columns for the date, and one for each of the four pens (black, blue, red, green) and put all of their weights on the first line. :)
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
I think this is one of the areas where accountancy and tax are treated differently. In the accounts you can use materiality and therefore those staplers aren't going to be capitalised (Like Alison suggests, I wouldn't capitalise anything below £500), for tax you may well have to claim wda's but for most small businesses they aren't going to breach AIA so no point (in my mind) going to the extra trouble. I can't believe the tax man is going to quibble over this if there is no extra tax to be found. I know Kris and I lean towards pragmatism more than say Shaun, Jo and Bill but I doubt that they would capitalise a stapler...now a desk?....
Edited as missed the word 'tax' out!
-- Edited by RobH on Friday 1st of April 2016 01:33:08 PM
I can be a pragmatist ....when its suits . Im a woman therefore can change my mind often (according to blokes!)
Ive just bought a new bin and hole punch for about £4 each - hmmmm, decisions decisions.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
. Im a woman therefore can change my mind often (according to blokes!
) 
