FRS102 1A Fair Value Losses - deferred tax

Losses on Fair Value of Investments Properties

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I have a client company with serveral HMO's

These have been professionally valued and there is a substantial fair value loss at the year end.

Given these valuations are on property (which have the potential to increase in value in the future) unders FRS102 1A, is there a requirment to recongnise the deferred tax assets on the loss. 

Thank you

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By paul.benny
04th Jun 2024 11:31

Yes, you should recognise the deferred tax asset - see FRS102 para 29.16.

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Replying to paul.benny:
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By Bobbo
04th Jun 2024 12:47

Bearing in mind para 29.7 of course

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By paul.benny
04th Jun 2024 13:15

You've only going to realise a deferred tax asset on a property revaluation if you sell the property. Of course it may reverse as and when the property is revalued upwards. For that reason, I think 29.16, which specifically refers to deferred tax on investment property is more relevant

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By Bobbo
04th Jun 2024 15:07

I don't think either extract is more relevant than the other, they should be considered together. Or rather 29.7 is considered first, and if content there is a deferred tax asset to recognise then move onto 29.16.

29.16 is from the 'measurement of deferred tax' section and tells you how you would measure the deferred tax "rates and allowances that apply to the sale of the asset".

29.7 is from the 'recognition of deferred tax' section and applies to any sort of potential deferred tax asset.

If all of this company's HMOs are worth less than cost and that does not change then on disposal the company will be left with chargeable losses it cannot utilise (beyond against other profits in the year of disposal). I.e based on the position of the properties as at year end, how would it recover a deferred tax asset?

To be clear i'm not saying don't recognise a deferred tax asset, i'm just saying it needs to be justified.

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