What is the effect on depreciation and capital allowances after VAT registration?

MTJR

Hi,

Can anyone help me with this.
If pre-registration vat is reclaimed for a fixed asset, what is the accounting treatment for the value of the asset and the depreciation? As it was originally capitalised as the vat inclusive value.

Also, the AIA was used in part for this asset on the vat inclusive value before registration. Would I now deduct the amount of VAT from the asset pool to account for that deduction of VAT from the asset value?

Thanks

MTJR

Deleted

anony123

Bro that makes no sense

uis143

Hi MTJR, I would debit the VAT control account and credit the cost of the asset for the input VAT claimed. The input VAT claimed will be treated as a disposal in the capital allowances pool and create a balancing charge if the balance of the pool is nil.
Hope this helps.
Kind regards
Christopher

MTJR

It makes sense. Perhaps you just didn’t understand? @anony123

Thank you @uis143

MTJR

And then recalculate the depreciation based on the value of the asset now that it doesn’t include vat? @uis143

anony123

Probs ?

uis143

Yes. You would now calculate depreciation on the amount net of VAT.