Assets are resources owned or controlled by a business or individual that have economic value and are expected to provide future benefit, such as cash, property, equipment, stock or receivables. For accounting purposes, they are typically classified on the balance sheet as either current assets (held short-term) or non-current/fixed assets (held long-term).
What counts as an asset
An asset is something a business owns or is owed that has value: equipment, vehicles, property, stock, money owed by customers and the bank balance. Assets are shown on the balance sheet, set against liabilities, which are what the business owes.
| Type | What it is | Examples |
|---|---|---|
| Fixed assets | Held to use in the business over the long term, not to sell | Property, plant and machinery, vehicles, computers, fixtures and fittings |
| Current assets | Not held for continuing use: cash, and items that will be sold or collected | Stock, debtors (money owed by customers), cash at bank and in hand |
Heads up - Assets are different from general expenses. If something is expected to be used in the business for more than one accounting period, it should usually be treated as a fixed asset rather than an expense.
How assets are treated for tax
The cost of a fixed asset is not deducted from profit as an expense when it is bought. In the accounts it is written off over the asset's useful life through depreciation. Depreciation is not deductible for tax, so it is added back in the tax computation and capital allowances are claimed on the cost instead. Some assets, such as land, do not qualify for capital allowances.
Where assets are recorded in Tax Optimiser
Tax Optimiser builds the statutory accounts and the Corporation Tax return from the period's trial balance, so assets are dealt with in two places:
- The trial balance, whether synced from Xero or QuickBooks, imported from a spreadsheet or typed in, carries the balance sheet figures for fixed assets, stock, debtors and the bank. The accounts are built from it. See Getting your numbers in: the trial balance.
- The Assets section of the Corporation Tax computation is where capital allowances are claimed on what was bought. It includes a General tab for the pools, a Fixed Asset Additions tab for purchases and an AIA Allocation tab for the Annual Investment Allowance.
The Assets section is part of the Corporation Tax computation, so it applies to companies and to other organisations that file a CT600, such as charities and members' clubs.
Adding an asset on the Fixed Asset Additions tab
To record something bought in the period:
- Open the accounting period and choose Corporation Tax from the period menu.
- Choose Assets from the Sections menu.
- On the General tab, switch on the pools you need.
- Open the Fixed Asset Additions tab and click Add Asset.
- Enter the asset's name, the date it was bought and what it cost.
- Choose the pool it belongs to, and say whether it was brought into use in the period.
Add one entry for each purchase. The date matters, because the allowance a purchase can get follows the date the expenditure was incurred.
Choosing the right pool
The pool decides which allowance the asset gets. Plant and Machinery covers most equipment and vans. Special Rate is for integral features of a building. Cars go to a pool by their CO2 emissions. An asset that does not qualify for allowances, such as land, should still be entered, with the pool set to Ineligible. If you are unsure which pool to choose, speak to your accountant.
How assets affect your tax calculation
The additions feed the pool computation on the General tab automatically. On the AIA Allocation tab you then enter how much of the period's spending to claim as Annual Investment Allowance. Anything not covered stays in the pool and gets writing-down allowances instead. The claim flows straight into the Corporation Tax computation, and the computation document gains the fixed asset schedules that support it.
When an asset in a pool is sold or scrapped, enter its net book value and the proceeds in the pool's column on the General tab. The proceeds come off the pool, and the profit or loss on disposal shown in the accounts is reversed in the computation.
Read more: Capital allowances in Tax Optimiser, Depreciation in your trial balance and The tangible fixed assets note.
