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Depreciation of buy-to-let residential property

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Could you please help me with the following?

There is a limited company, a special purpose vehicle for a buy-to-let residential property. It qualifies as a micro-entity and uses FRS 105. The investment property is a freehold residential house with the land. The cost is £250k.

Under FRS 105, the investment property should be depreciated.

I believe the land is not depreciated, is it correct? How can I separate the cost of the land from the cost of the building for this purpose?

The residual value definition in FRS 105 is ‘The estimated amount that an entity would currently obtain from disposal of an asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life.’

I believe that the age would not affect the amount obtained on the disposal of the property at all. Would this be a valid assumption for the calculating the residual value?

The ‘condition expected’ condition – Does this assume that the property would not be repaired, painted, etc till the end of its useful life? Because the maintenance of the property will be supporting it in the same condition as of today. If the assumption is that the property is in the same condition (i.e. maintained) then ‘condition expected’ also would not affect the amount obtained on the disposal of the property.

Are there any recommendations on the useful life of a freehold residential property?

Could you please advise what would be the correct approach for the accounting of the property?

Does it need to be depreciated if the above assumptions are valid?

Would it be incorrect to carry this property on the balance sheet at its original costs while the assumptions are valid?

Can the company claim Annual Investment Allowance or Writing down Allowance of the purchase of the buy-to-let investment residential property?

Could you please advise on the part of the relevant regulation or legislation applicable to my above questions?

Thank you

Replies (17)

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By SteveHa
23rd Dec 2020 19:52

I don't believe this has changed (but I'm a tax guy, not an accounts guy, so I could be wrong).

https://www.accountingweb.co.uk/business/financial-reporting/frs-105-ste...

And why Anon?

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JCACE
By jcace
23rd Dec 2020 20:00

"Can the company claim Annual Investment Allowance or Writing down Allowance of the purchase of the buy-to-let investment residential property?"
No.

While your efforts to research and look after the accounts and tax yourself might appear laudable, perhaps you should get some proper advice from a local accountant. A qualified accountant will have years of training and experience and be able to take all aspects of your unique position into account when helping you.

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blue sheep
By NH
23rd Dec 2020 20:27

are you the same anon that posted an almost identical question a couple of days ago?

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Replying to NH:
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By oi2004as
24th Dec 2020 09:37

No. Could you please give a link to that post? Thank you

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Replying to oi2004as:
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By Youareatit
24th Dec 2020 10:19

Sure you can find it if you try a little harder

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By Paul Crowley
23rd Dec 2020 20:43

.Anon
Is SPV JUST a company?

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Psycho
By Wilson Philips
23rd Dec 2020 22:20

9 questions from the OP - on this thread alone.

Stop trying to DIY and engage an accountant.

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Replying to Wilson Philips:
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By Wanderer
24th Dec 2020 03:35

Plus several other threads that are obviously from the same OP.

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Replying to Wanderer:
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By oi2004as
24th Dec 2020 09:42

Thank you everybody. I joined Accounting web a half of hour before I posted a question (so other questions from 2 days ago are not from me) hoping that there are professional accountants on here who know the answer.
Advices to ask a professional mean that they are not here

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Replying to oi2004as:
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By Wanderer
24th Dec 2020 09:53

Quote:

Thank you everybody. I joined Accounting web a half of hour before I posted a question (so other questions from 2 days ago are not from me) hoping that there are professional accountants on here who know the answer.
Advices to ask a professional mean that they are not here


Yeah right:-
https://www.accountingweb.co.uk/profile/oi2004as
oi2004as
Member Since: 12th Jun 2020
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Replying to Wanderer:
Psycho
By Wilson Philips
24th Dec 2020 10:26

I detest the acronym, but - LOL.

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Replying to oi2004as:
blue sheep
By NH
24th Dec 2020 09:57

Quote:

Advices to ask a professional mean that they are not here

Oh NO! facepalm - now you have really gone and done it

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Replying to oi2004as:
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By Youareatit
24th Dec 2020 10:23

Quote:

Advices to ask a professional mean that they are not here

Read - rules on anon posting. Your OP broke rules.

This forum is full of professionals, but some non professionals do manage to sneak in, which is why you are here presumably. The issue is the professionals on here do not particularly like giving information away to non clients for free. They do like to exchange information amongst themselves professional to professional. Occasionally. Which is why they come on this forum.

Now, if you are looking for a quote for the work, then now you are knownfolk can quote. Although you might find many professionals dont like taking on certain folk.

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By Tax Dragon
24th Dec 2020 11:00

Youareatit wrote:

The issue is the professionals on here do not particularly like giving information away to non clients for free.

I'm happy to 'give away' information 'for free'. But I'm not happy to give personal advice (in very large part because I think that's not actually viable in an open forum, given the need to discuss personal details). For me, jcace said it beautifully above.

This OP will say he's not asking for advice, just information. But the amount of information he's asking for suggests that what he really needs is advice*. So... I'm out.

*Or... an accountant to do it for him. (I'm still out.)

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Replying to oi2004as:
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By Truthsayer
24th Dec 2020 10:41

'Advices to ask a professional mean that they are not here'

You are insulting the many well qualified accountants here who are rightly telling you that you need to engage the services of somebody like them: you know so little about what you are trying to do that you can't even recognise your own incompetence to d-i-y, and you are a liar to boot (about when you joined AW, and maybe about whether you have posted already). If you asked a medical question on a website, and several doctors said 'See your GP urgently', would you respond with the phrase I have quoted above? Are you now going to dig yourself any deeper?

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Replying to oi2004as:
JCACE
By jcace
24th Dec 2020 11:17

Advice to seek professional help is not because such people are not on this site. It's because the nature of your questions demonstrates that that is what you need - advice from someone who can take everything into account, including the things you haven't shared on here, the things you think you already know etc etc.
This site has plenty of good accountants and tax advisers, but your best advice is to seek some local, face-to-face (with masks) advice. It will almost certainly save you money and time, not to mention ensure that you get things done properly.

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By Paul Crowley
26th Dec 2020 17:21

You will never get this right because all your questions demonstrate zero existing knowledge.
Accountants charge less to do it all, than to fix the mess up you will create
Ever gone to a hairdresser after trying DIY?

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