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Deferred tax buildings

Deferred tax buildings

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Had a call with our auditor. She is expecting to see a Deferred tax liability for buildings:

Historically, industrial building allowances have been claimed. But we dont take any capital allowances on buildings currently.

Buildings are depreciated for accounting purposes.

How do I find the tax basis for buildings. Buildings tax basis are not mentioned in my tax return (OneSource).

Do anyone else recognize DTL's on buildings? Is this common?

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By paul.benny
09th Mar 2021 16:38

If IBA have been claimed in the past on these properties, there will be a tax wdv somewhere - prior year tax comps perhaps.

What about last year's accounts? Was there a deferred tax balance relating to the buildings there? If not, why does your auditor think there should be one now?

And, I'm assuming that your buildings are at depreciated cost. If they've been revalued, the your deferred tax is based on the unrealised gain.

While you're at it, you should ask your auditor for guidance on the rate you should be using for your deferred tax liabilities. I'm sure their technical department will have a view.

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By Wilson Philips
09th Mar 2021 17:03

I would be surprised if there is any deferred tax to recognise in respect of non-investment land and buildings. The previous IBA claims are irrelevant - there are no longer balancing adjustments on sale. So I would expect ( although it is not certain) that the carrying value of the property in the accounts is not less than its tax base cost.

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