Investment Property

lcoupe

Hi,

Just looking for some advice.

I have multiple Ltd company accounts and self assessment clients, I'm happy with these no issues, however one of my clients has now purchased a residential property for rental purposes. He has done this through a Ltd company and has asked me if ill do his accounts for this.

I'm competent and comfortable doing company accounts however I haven't done rental / investment properties before and appreciate this are handled different in accounts.

Just a couple of questions.

The property costs along with stamp duty and legal fees get capitalised on the balance sheet, am I correct in thinking that there is no depreciation on the asset?

Also, at the end of the financial year, my client will need to revalue the asset and an adjustment will be made in the accounts. Can someone confirm if this re-adjustment sits on the balance sheet only or if any increase or decrease gets passed onto the P&L. If its passed onto the P&L this would then be subject to corporation tax?

thanks in advance.

AduxT

Hello, I am not sure if you have got your answer to your question but first you need to figure out if your client does qualify for reporting as Micro entity under FRS 105? There are different rules applicable when reporting under FRS 102 and FRS 105. FRS 105 is a simplified reporting standard and requires less disclosure. However, it does not permit depreciation or revaluation of the assets. Assets must be recognised at historical cost which is carried through until asset is disposed of. The stamp duty is effectively and asset that can be claimed back upon the sale of the property. Yes, it is a capitalised cost but, please keep a proper memo of it as it will be required upon a sale of the property. The rest of the answers depends on the reporting standard applied.