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Investment property tax consequences

Investment property tax consequences

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Please if I reclass a building that has never been depreciated to Investment property and recognises any revaluation gain/loss through p&l, would there be any tax consequences? Thanks.

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Psycho
By Wilson Philips
24th Sep 2020 18:45

Reclassed - from what?

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By Fum
24th Sep 2020 21:24

It has just been shown as fixed asset, this is the first time we are preparing the account as the new accountant. I will assume from ppe but never depreciated. The client has not depreciated because they assume it appreciates in value. Part of the building is used as rental income to external party and the rest to another group entity which they do not collect any income from.

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Psycho
By Wilson Philips
24th Sep 2020 21:59

Reclassification from one category of tangible fixed asset to another category of tangible fixed asset has no tax implications.

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Zia Tahir
By sphericalaccountants
25th Sep 2020 00:23

There will be a deferred tax liability if there is a gain. Since, it has never been revalued before, I am assuming that there will be a gain when revalued at fair value i.e. market value.
Gain will need to be adjusted on company's CT return (most software do it automatically as far as tagging is done correctly). There will be no actual tax liability.

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By Fum
25th Sep 2020 07:34

Thank you, this is quite helpful.

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By whitevanman
25th Sep 2020 11:52

A little off point I know but do remember that a property let to a related party, on non-commercial terms, is likely to raise several other taxation issues.

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