Low-value assets

What it means

Low-value assets last more than a year but cost less than the threshold for fixed assets under the Income Tax Act. The company may either capitalise and depreciate them or expense them straight into costs.

That choice belongs in an internal rule and has to be consistent. It is not a case-by-case decision - an inspection compares whether assets of the same kind are treated the same way.

Although low-value assets are often booked through inventory accounts and expensed when issued for use, they differ in substance from consumable materials: they are used again and again and years later remain in their original form. That is why they are still tracked after being expensed, whereas materials simply drop out of the records once consumed.

How it works in practice

Laptops, phones, furniture, tools and shop fittings are the usual cases. Even when expensed, they are tracked in an operational register with location and responsible person - without it nothing can be reclaimed when someone leaves.

That register also feeds the stocktake. Handing an item to an employee is recorded on a handover sheet, which forms part of offboarding.

When a company buys ten laptops at once for new staff, each unit is assessed separately, because each works on its own. The total of the invoice therefore does not decide whether this is a long-term asset. On hand-over we assign every laptop to a named employee with a signed receipt, which is what allows a loss to be dealt with as damage.

What to watch out for

Splitting one investment across several invoices below the threshold does not work: what counts is the functional whole. A set that cannot serve its purpose without one part is treated as a single asset, even if it arrived on three documents.

Low-value items also used privately - the managing director’s phone, laptop or tools - cannot go into tax-deductible expenses in full. Without a set share of business use, an inspection may disallow part of the expense and at the same time adjust the input VAT deduction on the purchase.