Depreciation

[dfen5]

Basically small stock 17’-‘18 devalued by say 10k.

Net profit =X then add on depreciation gives me my figure to work out corporation tax from

Accountant explained it but I don’t get it, I must be a bit thick. Why is depreciation increasing my corp’ tax? Surely it should reduce it?

Brain hurts..

[2 sMoKiN bArReLs]

He is suggesting that the write down is not allowable for tax & is therefore added back to your profit (after this deduction has been made) to calculate the tax.

Is it a stock write down or depreciation of a fixed asset?

[2 sMoKiN bArReLs]

If it's stock & the write down is line by line specific then it should be allowable for tax. If it's just a round sum then he's probably technically correct....but he should be advising to make it a proper calculation rather than disallowing it.

[dfen5]

2 sMoKiN bArReLs said:

If it's stock & the write down is line by line specific then it should be allowable for tax. If it's just a round sum then he's probably technically correct....but he should be advising to make it a proper calculation rather than disallowing it.

Looks like it was based on a ‘Retrospective Product Valuation report’ my book keeper ran whilst prepping the end of year. So that must be stock. I’ll have a look tomorrow. So if it’s line by line depreciation it’s allowed, ‘lump sump’ makes it taxable?

[2 sMoKiN bArReLs]

dfen5 said:

2 sMoKiN bArReLs said:

If it's stock & the write down is line by line specific then it should be allowable for tax. If it's just a round sum then he's probably technically correct....but he should be advising to make it a proper calculation rather than disallowing it.

Looks like it was based on a ‘Retrospective Product Valuation report’ my book keeper ran whilst prepping the end of year. So that must be stock. I’ll have a look tomorrow. So if it’s line by line depreciation it’s allowed, ‘lump sump’ makes it taxable?

Pretty much. Stock should be valued at lesser of cost or net realisable value.

[dartissimus]

Stock is the only adjustable in the Debtors, Creditors, Stock and Bank equation.

I know someone holding stock with a true value of 1 million plus, but a declared value of only £125k.

He was wanting to retire, but can't without massive problems, which proves that either death or the IR will get you in the end.

The can cannot be kicked down the road forever

[plasticpig]

dartissimus said:

Stock is the only adjustable in the Debtors, Creditors, Stock and Bank equation.

I know someone holding stock with a true value of 1 million plus, but a declared value of only £125k.

He was wanting to retire, but can't without massive problems, which proves that either death or the IR will get you in the end.

The can cannot be kicked down the road forever

If the warehouse burns down the insurance company isn't too impressed either.. Though there are plenty of companies who overvalue stock to keep the bank happy.

[dfen5]

I’d put the cost price of 2 items in 100 times the cost, plus a couple of other lesser 10x increases. Hence report way, way out. Sorted now but will do a full stock take ASAP. Had to upgrade to Sage Pro.