Buy to Let - Micro Accounts Filing

Why are property investors advised to submit small company accounts instead of micro accounts?

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Why do accountants advise to file small company accounts - in my view Ltd company investors without any revaluation should file micro accounts if they are in the threshold.

I do understand from lender's perspective but at that point we can issue full accounts to lenders. Interested to see other members views.

Thank you so much in advance. 

Replies (10)

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paddle steamer
By DJKL
24th Feb 2023 22:19

Why no revaluation?

Given Companies House holds the accounts one does not get to choose who views and when so if a revaluation maybe was possible but was not made then other prospective deals may possibly never happen as the other party takes a quick look, does not like what they have seen and never even approaches re a deal in the first place.

Also lenders can be iffy with sudden revaluations just before you tap them up and accounts with current year revalued but prior not can really look a tad needy.

I revalue, not always with surveyors but do tend to get fresh desktops every five years minimum.

Thanks (2)
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By Wanderer
25th Feb 2023 07:13

Micro accounts, if within limits, every time for us.

Revaluations are a waste of time. Any prudent lenders, buyer etc. will always put their own valuation on any property, ignoring what may be in the accounts.

Thanks (5)
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By Truthsayer
25th Feb 2023 17:23

I always file FRS105 accounts where allowed. I don't advise any company to use FRS102 if under the threshold. I don't even ask. I've never heard of accountants advising to the contrary.

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Replying to Truthsayer:
paddle steamer
By DJKL
25th Feb 2023 18:03

Well I, as an accountant, always prepare under FRS102 the accounts of our entities, so there at least is one.

As far as I am concerned FRS105 accounts tell me virtually nothing.

I spend a fair bit of my year vetting prospective tenants etc, or companies with which we may do deals, if I have two or three alternatives the one which readily gives me information ceteris paribus is the front runner, if all that they can pass to me is say FRS105 and a detailed P& L but the other can give me FRS102 accounts with lots of notes and a detailed P & L, then the latter makes my job easier and is more likely to get the property.

Thanks (2)
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By Bobbo
25th Feb 2023 17:58

kazarsalan wrote:

but at that point we can issue full accounts to lenders.

What do you mean by "full accounts"? How would they be any different from the statutory accounts prepared for members of the company?

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John Toon
By John Toon
26th Feb 2023 10:10

It depends on what you mean by advise...

In terms of our approach - it's the directors' choice and they're advised on the differences between the two reporting requirements. There are some nuanced differences between 105 and 102 for property investment businesses but the clear and obvious difference is in respect of the Fair Value accounting required under FRS 102.

As others have said it's unclear what you mean by full accounts but if you were preparing accounts under FRS 105, whatever your full accounts would be from a statutory point of view if you revalued properties they're just management accounts, and I'd wonder what lenders thought about management accounts not being remotely close to the stats they were looking at on Companies House.

Most of our landlords tend to use FRS 102 because they prefer their balance sheet to more closely reflect the reality of our bonkers propert market

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Kaz Arsalan
By kazarsalan
26th Feb 2023 10:34

Hi All,

First of all thank you for joining the discussion.

Clarificatons:

1st year of trading accounts being filed to companies house as micro entity accounts FRS105 - company holds two BTL properties and remains comfortably within thresholds . Revaluation next year.

Full Accounts - P&L along with BS can be provided to lenders if required in future.

I hope i have clarified every issue.

Kind Regards,
Kaz

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Replying to kazarsalan:
John Toon
By John Toon
27th Feb 2023 09:29

So you're moving to FRS 102 next year then? You will need to include all the transition statements etc in the accounts. This is why our advice would be: if you intend to revalue the properties start out on FRS 102 rather than 105 and deal with the unecessary disclosure burden of transition

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Replying to johnt27:
Kaz Arsalan
By kazarsalan
27th Feb 2023 16:25

What would you suggest if we revalue it after 5 years?

I understand transition hassle but if one is willing to take the transition hassle I cannot see any reason why they must submit FRS 102.

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Replying to kazarsalan:
John Toon
By John Toon
27th Feb 2023 17:36

It's really up to you, but bear in mind if you revalue in 5 years, you need your valuation at 4 years as well

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