De minimus amount for fixed assets

De minimus amount for fixed assets

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My new company (which is small and qualifies for FRSSE) has a de minimus limit of £500 before putting anything on the fixed asset register, hence it is virtually non-existent even though they have bought several computers over the last year.

My understanding was that something with a life over a financial year (obviously within reason ie not a hole punch!) should be capitalized.

I assume they are using this method as it will directly hit the P & L and therefore reduce any corporation tax liability, but if there is an HMRC visit how will they view this?

Are there any guidelines over what amount /life should be capitalized?

Thanks
Jess

Replies (7)

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By neileg
30th Jul 2008 16:04

Local Authority
We have a deminimus of £10k.

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By john carlos
29th Jul 2008 17:18

PUBLIC
Re Faerie Girl's comment on the Army's de minimus, the HM Treasury Financial Reporting Manual (FReM) leaves discretion to government departments to set their own capitalisation thresholds. National Assembly for Wales has adopted £5k threshold with a life of over 1 year. I have heard that other Governmenrt departments (in England) have £10k. Auditors tend to look for consistency.

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By skylarking
23rd Jul 2008 10:25

Accounts and tax treatment
Don't forget that even if the company policy is to write-off equipment in the accounts it should be added back in the tax computation and be subject to capital allowances. Are we doing this?

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By Richard Willis
23rd Jul 2008 10:12

A question of materiality
Hi Jess

Although I rarely comment on tax-related matters I am fairly sure that it is a question of materiality relative to the business.

I was told, many years ago, that ICI treat cars as revenue. This is because they have so many rolling over year on year that the effect of capitalising and depreciating them would make no difference. Whether this is (still) true I cannot say.

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By User deleted
21st Jul 2008 21:50

I use about £200-300
The HMRC helpline once told me to use about £300 so that is what I tend to use.

I get clients to tell me of asset / tool etc purchases over £100 and then I make my mind up depending on what it is.

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By AnonymousUser
21st Jul 2008 08:37

Plant
I believe the army won't capitalise anything unless it's over £10,000!

In addition to the 2 year rule below, I tend to use a figure between £100 to £200 dependant on the business, when deciding on revenue/capital. Whatever you decide to use, make sure it's justifiable and you are consistent in your approach.

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By AnonymousUser
19th Jul 2008 21:31

CA21100
"You should accept that an asset that has an expected life of two years or more (the 2 year test) is sufficiently durable to be plant."

This comes from old case law concerning items used by a shoemaker.

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