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graham c

Treatment of portfolio value on balance sheet of Ltd company accounts

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Hello fellow hubbers.

 

Coming up to filing my 1st year accounts for my Ltd Co. BTL SPV and wondering on the best way to deal with the valuation of the properties within the portfolio on the company balance sheet.

 

How do others treat this in their own accounts?

 

The (naive) options would appear to be:

  1. Define a method of valuation annually - e.g. Zoopla estimate value - 5% for optimism bias.
  2. Update the valuations any time I have an estate agent/surveyor valuation done on a given property (e.g. on completion of refurb or mortgage application).
  3. Get formal valuations on entire portfolio on a periodic basis (every 3-5 years).
  4. Don't bother and just use the purchase price in the balance sheet.

 

On the assumption that prices generally trend upwards, revised valuations would seem to have the advantage of making the company more favourable to lenders (if they ever decide to look at accounts).

 

However, I'm not sure what is permissible with accountancy/HRC rules etc. I have a query outstanding with my accountant but it's self-assessment crazy season and he isn't a property specialist (I have multiple businesses).

 

Any thoughts and experience welcome.

 

Thanks,

Graham

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Thanks Debbie,

 

FFRS102 states:

Quote

"An investment property shall be measured at fair value at each reporting date with changes in fair value recognised in profit or loss."

 

Does that mean an increased valuation in a given reporting period would attract income tax for that period or is this deferred until crystallised?

 

Thanks,

Graham

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Hi @graham c

Just reading this thread from a while back.  I invest through a limited company, and at each year balance sheet date me and my partner take a view on the market value of each property in the portfolio and pass these on to our accountant.  So far, we haven't had to move the values, as all the properties have been purchased in the last couple of years in areas where there hasn't been much price movement.  As such, we've simply left the values equal to the original purchase price, including all the relevant purchase expenses.

I agree with @debbie franklin on the tax points and it's worthwhile saying also that the final tax on disposal would be at corporation tax rates and there might also be indexation allowance available on a sale, depending on when the property was purchased, which could help lower the tax bill.

I hope this is helpful.

Best wishes

Rob


Robert Heaton

Greenwich Bookkeeping | www.greenwichbookkeeping.co.uk

Author of "Essential Property Investment Calculations" - Available on Amazon

 

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