Where should a FHL appear in a balance sheet?

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I have a client who carries out multiple trades under one company. The company has recently acquired a property which qualifies as a furnished holiday letting.

My question is: should this be recognised as an investment property in the accounts under FRS102, given that it is a trade for tax purposes? Or should it fall under Property, plant and equipment?


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paddle steamer
18th May 2017 21:30

I would go with no, following the thought process in IAS 40 re services provided.

"Ancillary services. If the entity provides ancillary services to the occupants of a property held by the entity, the appropriateness of classification as investment property is determined by the significance of the services provided. If those services are a relatively insignificant component of the arrangement as a whole (for instance, the building owner supplies security and maintenance services to the lessees), then the entity may treat the property as investment property. Where the services provided are more significant (such as in the case of an owner-managed hotel), the property should be classified as owner-occupied. [IAS 40.13]"

Not something I have ever needed to consider but I think the service element re sheets/cleaning/ towels/soap etc overides the fact that for tax purposes the receipts are treated as rents.

Interesting question.

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