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Depreciation and VAT

Hi, our company has just registered for VAT.

I just wanted to check how this affects depreciation.

Once VAT registered, the original cost of an asset will include or exclude the VAT amount for depreciation purposes?

Many thanks in advance for your help.

Alex 

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avatar
07th Apr 2010 16:39

don't include

 

when you buy the asset, the vat element will go to the vat control account which will be reclaimed, and the net amount will go to the asset account.  

This leaves just the net value subject to depreciation.

think of vat as just a temporary thing - it comes in, it goes out.

 

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avatar
07th Apr 2010 16:51

You may be able to go back and reclaim VAT on some assets

You may (subject to certain conditions), be able to go back and reclaim VAT on some assets bought up to three years ago.  You will then need to adjust the cost of these assets in the current year, and adjust depreciation already charged too.

Old assets on which you can't reclaim any VAT for whatever reason will continue to show in the accounts at their VAT inclusive cost and will be depreciated on this amount. Evrything else will be on the net cost.

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