Equipment and goods lose value over time as they get older. This loss of value is depreciation. Businesses claim depreciation as an expense each tax year.
You can claim depreciation on capital expenses you own, lease or hire.
Revenue or capital expenses
Most businesses have both revenue and capital expenses.
Revenue expenses are items used in the day-to-day running of a business. You can deduct these expenses in tax returns. They can be stationery, rent and power.
Capital expenses are fixed assets kept for longer than a year. These expenses can include computers, vehicles and machinery. Depreciation is only claimed on capital expenses.
Deciding not to depreciate
Businesses must claim depreciation on their fixed assets. There may be assets you decide not to depreciate.
You need to tell us when you decide not to depreciate an asset.