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

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MTJR
MTJR Registered Posts: 30 Regular contributor ⭐
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

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  • MTJR
    MTJR Registered Posts: 30 Regular contributor ⭐
    edited August 2023
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    Deleted
  • anony123
    anony123 Registered Posts: 434 Dedicated contributor 🦉
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    Bro that makes no sense
  • uis143
    uis143 Registered Posts: 11 New contributor 🐸
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    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
    MTJR Registered Posts: 30 Regular contributor ⭐
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    It makes sense. Perhaps you just didn’t understand? @anony123

    Thank you @uis143
  • MTJR
    MTJR Registered Posts: 30 Regular contributor ⭐
    edited August 2023
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    And then recalculate the depreciation based on the value of the asset now that it doesn’t include vat? @uis143
  • anony123
    anony123 Registered Posts: 434 Dedicated contributor 🦉
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    Probs ?
  • uis143
    uis143 Registered Posts: 11 New contributor 🐸
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    Yes. You would now calculate depreciation on the amount net of VAT.
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