Ssap 19 Investment Property, Fair Value And Tax Considerations Of Piercy
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In the current economic climate it is very difficult to define “fair
value” of investment properties. The matter is made more
when the property is under construction.
The disclosure in
accounts of investment properties that have been “built” or are about
to be built is complex. There has been a recent change to
The guideline has been amended so that properties under
can be accounted for as investment properties and shown at fair
However, investment property under construction can only be carried at
fair value prior to 1 January 2009 if its fair value had been
determined at that earlier date. In many cases the historical
value information will not be available and so the change will only be
capable of being applied prospectively;
How difficult will it be
to determine fair value? In this economic climate, there are
be more investment properties available and very difficult to define
“fair” in the current market conditions.
In Piercy (DWC Piercy’s
Executors v HMRC  Sp C 687 (June 2008), Business Property Relief
(BPR) was allowed for Inheritance Tax (IHT) purposes on land that was
waiting to be built on by a developer. For accounts purposes
the land stock would be shown as trading stock. The property
have to be valued at the lower of cost and net realisable at the
Balance Sheet date. Complex considerations as to what the
worth and how it should be shown will be an ongoing problem for
accountants, auditors and tax advisers.
The current climate is
increasing the need for auditors to consider “going concern” and for
Banks to place very close attention in order for the lending facility
to be reviewed.
Then amongst all the disclosure concerns the tax planner has to look to
ensure BPR will be achieved on property.
live in interesting times and these decisions are not for the “faint
hearted”. There are going to be numerous complexities and
of “true and fair” accounts linking to tax planning and the Bank
pressure will be huge.
There are tax considerations of
accounting disclosure. The Piercy case was about achieving
trading property temporarily being used as investment property, i.e.
property let out whilst planning permission delays etc, prevented sale.
changes to SSAP 19 and the Piercy case have highlighted the importance
of deciding what is an investment property and when is an asset used in
the trade. The importance is not just for disclosure but for
planning purposes. The matter is more complicated when a
under construction and even more complicated when looking at the
interaction of going concern.
About the Author
Article supplied by Julie Butler F.C.A. Butler & Co, Bowland
House, West Street, Alresford, Hampshire, SO24 9AT. Tel:
01962 735544. Email; email@example.com, Website; www.butler-co.co.uk
Julie Butler F.C.A. is the author of Tax Planning for Farm and Land
Diversification ISBN: 0754517691 (1st edition) and ISBN: 0754522180
(2nd edition) and Equine Tax Planning ISBN: 0406966540. The
third edition of Tax Planning For Farm and Land Diversification is
currently being written and will be published shortly. To
order a copy call Tottel Publishing on 01444 416119.
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Article Published/Sorted/Amended on Scopulus 2009-03-02 12:42:04 in Tax Articles
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