Afternoon - I hope you're all having a nice Easter period.
Just trying to clear two to three things up.
A property let out (a house to a tenant) is classed as an investment as it's held to make rental profits - so no depreciation of the property, is this a fair interpretation?
If on the same property, either a new window, or new roof is needed is it correct to say that in the case of the roof at least, the repair is so vast it would be recognised as a new capital asset?
I've read the repair v capital arguments and some case laws - I just think a new roof, even if it is a genuine repair would be capital.
Is it permissible to depreciate the new roof and window, or is it because they form part of the same investment property, depreciation is blocked too?
On a new window / roof, no capital allowances are allowed as they are both blocked by statute. Therefore the only relief available is when the landlord comes to sell the house. Such like;
Proceeds less ( original cost plus cost of new roof and window.)
Sorry, I didn't mean the post to include so many questions.
Is the property Freehold or Leasehold? I think you can apply depreciation if the investment property is leasehold with a certain amount of years left, but not sure how many!
If it is a new roof I would class it as an improvement to the property and therefore Capital in nature, in the case of the window is it just a replacement? if so then I would expense it, or is it a newly formed opening that would be classed as an enhancement to the property which would then be classed as Capital.
HTH
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
Yes, I guess, although not useful to say when asking a singular question - the treatments of a lease and a freehold.
If it is a lease, is it the lessor that can claim depression? (Can I relate the treatment in regards to a lease the same as you would an operating lease v finance lease?)
I'm trying to work my way through the FRS 102, tax act and PIM manual!
I think it was in FRS 102 16.X or such that I noticed investments are property held for rents (or to that effect!)
The roof I kind of assumed would be capital because of the obvious cost and it would be an entire new 'asset'
What threw me was reading up on capital allowances within the CA Acts, walls, Windows and such to that effect are blocked, which lead me to believe it would be added to the cost of the house.
So if you own this house freehold, you rent it out, to then buy a roof, can you depreciate the roof?
I mean if you buy a new jet engine, you'd depreciate that. But what is throwing me is the caveats surrounding property!
If it is a lease, is it the lessor that can claim depression?
You can claim 'depression' whenever you want to, although things are always better when you are happy!! Lol.
Sorry but that was an even better one than my 'equestrian' comment the other day.
The roof is not classed as capital due to the amount expended on it (that is not what defines such), and it is not an 'asset', but rather an improvement to an asset (rather than a repair consisting of a couple of tiles).
I think you should read Doug's response again as I think you've misunderstood it.
Persoanlly I think the question is far too broad, covers far too big a subject, especially for a quick answer on here on a bank holiday Sunday. I for one haven't got the time for a full discussion on this one so will leave up to everyone else, maybe dip back in again if and when I do get some time over the next week, but can I suggest the questions be narrowed down and the answers backed by case law otherwise it could all get a bit woolly.
Also it mightve helped in the first place to understand if you are talking a limited company or an individual
Just my view!
-- Edited by Cheshire on Sunday 16th of April 2017 10:24:33 PM
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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
Does this mean that I can claim "Depression" as an expense?
Available as an expense, but one you can capitalise on too! (subject to claiming depreciation, with no add back on the CT return required and a double counting of cap allowances allowed). Might as well go the whole hog!
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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
I'd like to know if there is any profit in owning a buy to let property - in a rental income sense, or is it held in the hope of capital appreciation?
With the government closing down somewhat on interest relief I can think of better ways to be investing!
Anyway....
Agree with the points made by Doug and Joanne.
FRS 102 is quite thin on the ground, my copy (Sept 2015) runs a huge, from front to back, 384 pages - I've study texts double that!
IAS 40 may be a better read, or to be read with section 16.
It does however, in section 16 refer to the disclosure needed -( I can't remember word for word ) if fair value method is used (which should be used for an investment property) it requires that in the notes details of whether a professional is used to revalue the asset or not - which to me at least says that a professional does not have to be used in providing a figure for fair value.
Now that could be egg on face for me with my interpretation.
Are people who own residential homes and letting them out, getting professional valuations each year?
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Johnny - Owner of an overly-active keyboard.
A man who can read, yet doesn't, is in no way wiser than a man who can't.
You would need to use a professional where there is not a readily ascertainable market value that can be evidenced.
i.e. if you have a terraced house in a line of terraced houses and others are for sale then the price is relatively easy to judge. However, that wold never carry as much weight as a full professional valuation.
also remember that if you own multiple properties then if you revalue one property you must also revalue all of the other properties. You cannot apply selective revaluations.
Really must go, laters.
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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.
