oil barron
Member
- Location
- Aberdeenshire
The depreciation is taken out of your profit and loss statement, but added back in to your tax computation because you made use of the annual capital allowance. So the depreciation is not net being added on, it is just being added back in after being removed in the first place.I would get capital allowances on the initial purchase in year one but after that the depreciation will be added onto my profit and I will get charged income tax on it.
How can I use depreciation to reduce profits? If I could see a way to do this then buying would be the better route by far
I think you also have the option not to use the capital allowance and just follow a depreciation schedule if you want, which probably makes more sense for a farmer that only buys big pieces of equipment every 5 years or so.