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books2013


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Freehold property depreciation
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Hello everyone,

Ive a client who has bought a property via the company and I am looking to double check my thinking is correct;

Original purchased for 200k, refurbishment undertaken 100k, revalued now 350k.

In the first years account depreciation wasn't accounted for as the property was not in use.

Now there has been a revaluation and property is in use, I'm thinking it should be depreciated over 50 years?

In practise how do I split between land and buildings, valuation doesn't make a distinction?

I would be grateful for any help. many thanks

 

 



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Shamus


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You do not say what sort of property this is? If it's an investment property different rules apply.

I always find this area unnecessarily complex as you hit the nail on the head over the division of land and buildings.

So, we separate land and building, we depreciate the building through the books, we get a profit/loss figure but then we add back the depreciation for tax purposes and there are no capital allowances available for it.

What really was the point of depreciating something that appreciates in value.

Add to that that the depreciation means nothing and the only thing that really means anything is revaluation which automatically resets the depreciation clock.

On the other matter a professional business valuation of property should have made the distinction between the land and the building. If the value of the land is not readily ascertainable you may need a second valuation to show the value of the land. The value of the property is simply full valuation less the value of the land (I know, it's obvious but I just finished with that for completeness).

kindest regards,

Shaun.;

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Shaun

Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
books2013


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Hi Shaun

Thanks for taking the time to reply. Apologies its not investment property.

So I need to go back and get client to get valuation to split out, then as you say its a just an exercise for the company accts, it really is a nuisance isn't it


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Cheshire


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Shamus wrote:


On the other matter a professional business valuation of property should have made the distinction between the land and the building. If the value of the land is not readily ascertainable you may need a second valuation to show the value of the land. The value of the property is simply full valuation less the value of the land (I know, it's obvious but I just finished with that for completeness).

kindest regards,

Shaun.;

 Totally agree with that and Ive seen a million and one valuations in my time, which have always given an overall figure but then also split the land/buildings.  Often the insurance company will want to see that, never mind any commercial lenders of any repute.



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 Joanne 

Winner of Bookkeeper of the Year 2015, 2016 & 2017 

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position
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