Asset disposal

What it means

Disposal removes an asset from the books on sale, scrapping, donation, damage or contribution to another company. Further depreciation ends with it.

The net book value goes to expenses, but deductibility depends on the reason. On a sale it is generally allowed up to the sale proceeds; on scrapping, as the statute provides.

Disposal is final: the asset leaves the company or ceases to exist. A machine that stands idle for a while is not disposed of and stays on the register; at most the company can consider suspending tax depreciation until it is used again.

How it works in practice

A document supports each disposal: a sale contract, a scrapping protocol, proof of handover for recycling, a police report for theft. Without it the disposal is unproven.

The stocktake is the moment to clean up: registers carry assets that have not physically existed for years, still generating depreciation and distorting the balance sheet.

A common case: the company sells a company car to the director or a member. The price must be set at the market level because the buyer is a related party, and if input VAT was deducted on purchase, VAT is charged on the sale. We prepare the sale contract and book both the sale proceeds and the net book value.

What to watch out for

Disposing of an asset on which VAT was deducted can trigger an input tax adjustment. That is what gets forgotten most often during a tidy-up of the register.

When an asset is given away, its net book value is generally not tax-deductible and the free transfer may be subject to VAT. A company that simply gives an old computer to an employee or a school finds this out only in an audit, and for the employee it is also a benefit in kind taxed through payroll.