Capital Allowances and Depreciation

Yes.

Capital allowances follow tax rules. You also have the choice of not claiming them if they won't save you tax in a particular year. You effectively save them for the future when it is more tax efficient.

With depreciation you are broadly allocating the cost of the asset over it's life.

How do you track both? I mean accountancy software such as Quickbooks will let you depreciate assets. But then you need to track capital allowances over time too don't you? What is the current best practice for this?

Jon

Yes.

Capital allowances follow tax rules. You also have the choice of not claiming them if they won't save you tax in a particular year. You effectively save them for the future when it is more tax efficient.

With depreciation you are broadly allocating the cost of the asset over it's life.

Usually a spreadsheet, or your tax software might do it for you.

You use a spreadsheet. Different types of assets headings along the top and set out chronologically down the side are the FYA, WDA & BC's. Any restrictions are applied and the capital allowances are totalled for each period. You keep a running total of the balance remaining for each type of asset. Types of assets means how they should be grouped for tax purpoeses.

There has been discussions about how depreciation should mirror tax treatment but I feel this is a flawed attempt at simplicity. Depreciation is easy to calculate and the tax calculation is easy if you know the rules. If depreciation is simple by doing it properly why do it any other way?