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Freehold Property Depreciation

Depreciation charges and land/property split

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How would you calculate the depreciation on a property used for rental purposes? I understand that you cannot depreciate land, so would you take an educated guess here and presume an 80/20 (Property/Land) split, and then depreciate on the property only? Or is it compulsary to have each property/land split valued by a surveyor?

Following this, what would be an appropraite depreciation % to use here?

Many thanks in advance.

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21st Mar 2019 08:47

I'm guessing this is a company.

Are you preparing accounts under FRS 105 or 102 1A ?

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to lionofludesch
21st Mar 2019 11:22

Quote:

I'm guessing ...

So is the OP "presume an 80/20 (Property/Land) split".

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to lionofludesch
21st Mar 2019 11:34

Yes for a company, and FRS 105

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By DJKL
21st Mar 2019 11:41

No idea of the accounting but can advise that the 80/20 looks a tad adrift, it may be correct particular to where you are but it is certainly not universally correct.

Back in the late 20th century up to 2007 we used to start our very crude in house first estimate desktop site valuations as 1/3 build cost (inc materials and prof fees through building phase), 1/3 land cost (inc SDLT and professional costs re acquisition and planning), 1/3 profit, overhead, finance cost and sales and marketing, the theory being that one can readily value the finished item on the site so by backward calculation what should one pay to buy the site unimproved.

This was back in the day when we were actually buying sites to develop; to accurate site valuation this was akin to licking a finger and holding it into the wind.

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