Form 11: Depreciation, Capital Write Off & Capital Allowances

[participant]

I know there are a few related questions here that covered similar issue however they don't fully answer my query and I would be grateful if someone could shed some light on how assets/write-off/depreciation should be treated in books & form 11.

Example:

• 2013 Bought PC 1 for 2,000 in 2013 (depreciation - 250)
• 2014 Bought PC 2 for 1,000 in 2014 (total annual depreciation - 375)
• 2015 Bought PC 3 for 600 in 2015 (total annual depreciation - 450)
• 2016 Write off PC 1 in 2016 (total annual depreciation - 200 & write off amount 1,250)

Annual depreciation @ 12.5%

Questions:

Income Statement

• Is the depreciation amount included as an expense on P&L statement, e.g. 250 in 2013, etc?
• Is the write-off amount included as an expense on P&L statement, e.g. 1,250 in 2016?

Balance Sheet

• The remaining value of assets included under assets on Balance Sheet, e.g. 1,750 in 2013, etc?
• Depreciation and/or write off does not need to be included on Balance Sheet since they are already deducted from profit/loss account or are they included as a capital allowance? If the latter are both depreciation n & write-off amount included here? Since the P&L account is also included here from Income Statement I wasn't sure whether we need include again here?

Form 11

• Where and how exactly both depreciation & write-off needs to be accounted for on this form?

Thank you

 

[dublin67]

The general rule is that depreciation isn't allowable as a tax deduction. Instead you claim capital allowances and disallow (or addback) the depreciation in arriving at the adjusted case I taxable profit. While you are writing assets off at 12.5% you will get the same figures but there are different categories on the Form 11 so you'll need to addback depreciation and claim capital allowances at 12.5% on a straight line basis.

Don't get your taxable profit calculation and accounting profits mixed up. Both are calculated under different rules.

Income Statement

• Is the depreciation amount included as an expense on P&L statement, e.g. 250 in 2013, etc? Yes, but this this is added back to calculate your taxable profit.
• Is the write-off amount included as an expense on P&L statement, e.g. 1,250 in 2016? As above.

Balance Sheet

• The remaining value of assets included under assets on Balance Sheet, e.g. 1,750 in 2013, etc? Yes on the balance sheet - cost less depreciation and show as a deprecation reserve - this is a credit balance.
• Depreciation and/or write off does not need to be included on Balance Sheet since they are already deducted from profit/loss account or are they included as a capital allowance? If the latter are both depreciation n & write-off amount included here? Since the P&L account is also included here from Income Statement I wasn't sure whether we need include again here?

Form 11

• Where and how exactly both depreciation & write-off needs to be accounted for on this form? Depreciation is shown as an addback on the accounts pages and capital allowances is claimed in the trading section.