Hi there. My Ltd company has used some surplus cash to invest in OEICs and Unit Trusts.
Let's assume they invest £10k and at the end of the financial year the investments have increased in value to £15k. This reflects the £10k investment and the £5k unrealised gain. I understand there has to be a fair value adjustment in the P&L to refelct the increased value of the investment to £15k.
However, it was my understanding that unrealised gains of this nature should be stripped out of the calculation for Corporation Tax. And that Corporation Tax will only become due on gains in the investment value at the point which the investment is sold (i.e. the point which the gain becomes a realised gain).
Our auditors have disagreed with this, saying that Corporation Tax is due on the gain made in each financial year, regardless of whether it is a realised or unrealised gain.
I'd appreciate some guidance on which approach is correct (mine of the auditors) so that i can identify whether this is something i should be raising with the MD of the company.
Many thanks in advance for your comments