Depreciation

[maddmatt]

Morning fellow rotorheads :-)

Hoping someone can give me some advice based on their experiences, I have been looking at purchasing a machine through an existing limited company and wanted to know what percentage depreciation you can offset each each when doing the accounts, asked my accountant but he was not 100% sure so I thought I would ask on here...

Cheers :ok:

[paco]

If you want to write it down quickly (three years), make sure you do a LOT of hours (600 hours or so?). Otherwise about 10 years. This is based on the experience of a friend.

Whirls might know better!

Phil

[maddmatt]

Thanks Phil, just curious to what *might* be achievable without annoying the tax man :-)

[tyl3r]

I think you’re possibly confusing depreciation with capital allowances. The first is presented in your accounts and is little more than a vanity figure (although it’ll typically follow a set formula). The second is perhaps more what the tax man is concerned about (https://en.wikipedia.org/wiki/Capital_allowance and https://www.gov.uk/topic/business-tax/capital-allowances). Sounds like you should get a new accountant!

[firebird_uk]

I've depreciated my 44 by 10% of the original purchase price per year for 10 years (so you get 100% depreciation) and believe this is the norm.

Unlike IT equipment and other such items you can depreciate from the original price and not just the residual price on your books.

[maddmatt]

To be fair to my accountant this is not something he usually does and he is probably doing his usual arse covering :-)

[John R81]

Depreciation charged in the accounts will write-off the value of the machine to the P&L account over the economic life of the asset. In calculating your tax position, that depreciation is added back completely. You can claim capital allowances against the tax bill.


It then depends on whether your asset is "long-life" or not.


Most aircraft are considered "long-life" assets and excluded from the general equipment pool for capital allowances. There is an agreement with the airlines. However, for aircraft not covered by the airlines agreement see
CA23782 - Plant & Machinery Allowances (PMA): Long-life assets: Aircraft not within agreement (https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca23782)

Accept that helicopters:

in use for in excess of 1,000 hours per annum, or
in use for more than 600 hours with 2,000 or more landings per annum, or
which have a maximum take-off weight of less than 650kgs,
will not last for 25 years and will attract the rate of writing-down allowance for the main pool. For those in less intensive use below that figure you should approach any claims on the basis that the assets will only attract the rate for the special rate pool.








I believe that Robinsons are accepted as short-life assets due to the 12-year rebuild.

[maddmatt]

Thanks John

[chalmondleigh]

MM

You should also check with your Accountant about your liability for Benefits In Kind which can be substantial.

[John R81]

Re BIK

HMRC current practice is to assume the helicopter is available for use of the director unless you prove otherwise.

BIK calculated as 20% of the value of machine when first made available to anyone as a BIK plus running costs. Then pro-Rata reduce for time not available - maintenance and other hires - then reduce for any contributions that you actually made for your flight time.

That may seem unfair, as available hrs included any time it sits idle and no-one is using it but that is how the calc works.

Also be wary of VAT issues

John

[maddmatt]

I think this is the underlying reason the accountant didnt fancy touching it, too many grey areas for him and seeing as he is risk adverse to the extreme probably thought it would be better not to touch it with a barge pole.

Thanks again John, its a wonder how or why anyone buys a helicopters privately!

[John R81]

I think this is the underlying reason the accountant didnt fancy touching it, too many grey areas for him and seeing as he is risk adverse to the extreme probably thought it would be better not to touch it with a barge pole.

Thanks again John, its a wonder how or why anyone buys a helicopters privately!

No worries. PM me if you want to chat. There are specialists in this area who can help, but they charge fees a little higher than small local firms.

Best wishes

John

[md 600 driver]

Madmatt



Thanks again John, its a wonder how or why anyone buys a helicopters privately!


This is precisely the reason why people buy their helicopters privately

And not put them in a limited company Shell

[FlimsyFan]

Afternoon,

Depreciation on our R66 - 12 year straight line.

BIK - as I am a shareholder / director / rated pilot, I was very concerned about the BIK, as 20% per annum of 880k (purchase price plus VAT plus running costs + VAT) tax liability would be totally uneconomic. As a previous post points out, HMRC's position is very clear - you incur BIK for all the time the machine is available for your use.

In my case that would equate to pretty much all the time.

We put together a list of customers and suppliers who require regular and justifiable visits by Directors and Senior Managers, along with the frequency of those visits. We then put down an estimated travel time by heli vs by road (from AA route planner). We calculated a time saving over the year and then adjusted it for a sensible percentage of times where the flight would be able to take place due to weather etc (think we used 60%).

On this basis, we demonstrated that the most influential members of the business would be more productive over a period of time, and this should result in improved business performance.

On this basis, HMRC gave us a pre-clearance that my personal BIK liability would be calculated based on percentage private hours versus total hours. This works well for us.

This method only works if the machine is genuinely used for the vast majority of flights for business purposes. We log each flight with a listing of who attended each meeting and with whom.

I'm not an expert by any means, but if you PM me, I'll gladly pass on the details of the accountants who dealt with it for me (they are not specialist aviation guys).

It is also well worth considering the handling of VAT - if machine for business use, good chance of full reclaim, but again getting a pre-clearance would be a good idea.

Hope that helps

[maddmatt]

Thanks, just shows how difficult things like this are in the UK! My original post was so I could see if a business we looked at acquiring were depreciating their airframes properly, suffice to say they weren't, also they want too much cash so we binned the idea.

[md 600 driver]

I have had similar problems with HMRC

You could have a board meeting to qualify that the aircraft is not available for private use only company business ???

To stop BIK totally. you could get your insurance company to state either no private use , only private use with specific board permission
The HMRC can't charge you BIK if the heli is not insured (not legal to fly ) and the aircraft is not available to you 24/7
Been there done it paid for the tee shirt

[FlimsyFan]

MD Driver,

we do pre-approval by board, and pre-payment for private use. Per pre-clearance, we ought to be on safe ground.

It doesn't help, however, if the aircraft is hangared in the grounds of said Director's home. I have a friend who found this the hard way.

FF