How do you record Altium purchase on books?

[Bud]

Question for those who purchased Altium Designer for their companies - did you record it as software purchase, and therefore depreciate the cost over a few years, or as a license which I guess can be written off entirely in year one ? My understanding Altium sells you a license, you do not own the software.

[Fgrir]

I am not an accountant, but my understanding is that the initial license purchase is for a perpetual license and therefore get treated as an asset with 3-yr straight-line depreciation.  Annual maintenance gets booked as an expense since it is by definition not valuable for more than a year.

Of course this is all for the US and I could be totally wrong...

[Codex]

I thought small companies can write of 20K now.

[DerekG]

I thought small companies can write of $20K now.

This is the currently the case in Australia, however the original poster lives in Canada.

[Bud]

The question boils down to if a license is considered a capital item or an expense ,for tax purposes.

[DerekG]

The question boils down to if a license is considered a capital item or an expense ,for tax purposes.

The answer to this will vary in different countries as it depends on how the tax office in that country classes it.

Currently in Australia a AUD$20K write off is allowed for any individual item to get companies spending again after the GFC.

However it would normally be classed as a "software purchase" & would be able to be depreciated at a rate of 30%.

I suggest you speak with your accountant in Canada (or take a look at the Canadian Tax Office website).

[EEVblog]

I thought small companies can write of 20K now.

They can in Australia.

[mikeselectricstuff]

In the UK it's £500K
https://www.gov.uk/capital-allowances/annual-investment-allowance

[PA0PBZ]

In the UK it's £500K

But...

You can’t claim capital allowances on:
 - things you lease - you must own them

So maybe you don't 'lease' the software, but I don't think you own it?

[mikeselectricstuff]

In the UK it's £500K

But...

You can’t claim capital allowances on:
 - things you lease - you must own them

So maybe you don't 'lease' the software, but I don't think you own it?

I think that's just a minor technicality - in all financial and practical terms it's no different from equipment purchase, the only possible exception being ability to resell (where limited by license conditions) , though that makes it even more like a 1-off purchase that should be 100% allowable immediately as depreciation. 

[alanb]

In the UK it's £500K

But...

You can’t claim capital allowances on:
 - things you lease - you must own them

So maybe you don't 'lease' the software, but I don't think you own it?

I think that's just a minor technicality - in all financial and practical terms it's no different from equipment purchase, the only possible exception being ability to resell (where limited by license conditions) , though that makes it even more like a 1-off purchase that should be 100% allowable immediately as depreciation.

My understanding is that in the UK the Capital allowance on a lease asset goes to the leasing company not the lessee. This is different to the case purchasing with a loan or HP in which case the capital allowance goes too the purchaser.
 

[DerekG]

My understanding Altium sells you a license, you do not own the software.

After further investigation I find that you do in fact "own" the Altium software outright. You can sell your copy to another company if you so wish. Altium will amend their records to reflect this as long as they receive written confirmation from the seller.

Therefore, the software itself is considered an asset. The annual subscription (maintenance) is paid for in 12 monthly blocks & so it able to be written off each tax year.

Most tax legislation will deal separately with the cost of "software purchases" & certainly in the western world, most tax jurisdictions allow you to write it off over several years (or write it off entirely in the first year if it is under a certain value).

[mikeselectricstuff]

In the UK it's £500K

But...

You can’t claim capital allowances on:
 - things you lease - you must own them

So maybe you don't 'lease' the software, but I don't think you own it?

I think that's just a minor technicality - in all financial and practical terms it's no different from equipment purchase, the only possible exception being ability to resell (where limited by license conditions) , though that makes it even more like a 1-off purchase that should be 100% allowable immediately as depreciation.

My understanding is that in the UK the Capital allowance on a lease asset goes to the leasing company not the lessee. This is different to the case purchasing with a loan or HP in which case the capital allowance goes too the purchaser.
 

Probably true for hard products which have resale value, but I can't see argument that software should be treated as being leased. I've never seen that word in a EULA. Less so as it has no value to the "lessor".

[ehughes]

In the USA,  see IRS sertcion 179.   Expense that year 1....  None of this depreciation nonsense