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Post Info TOPIC: Balance Sheet incorrect


Guru

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Balance Sheet incorrect


Hi all

New client has a Ltd Co ''owning' two properties which they have asked me to do the accounts for, they done last years accounts themselves and the properties have been included on the balance sheet but there were no profits on rental, on taking over the accounts and looking into this further it transpires that the mortgages are actually in the individuals name so the properties should never have appeared on the Companies Balance Sheet as an asset, I need to remove the properties from this years B/S but am considering the best way to go about this without having to amend the previous accounts, any suggestions? It only affects the CH financial statements as there were no profits to declare on the CT600

Many thanks



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Doug

These are only my opinions of how I see things and therefore should not be taken as advice



Guru

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Hi Doug,

I would redo last year personally because that is such a large 'error'. FRS 102/105 says that prior year adjustments need to be done if the error is material, I'd certainly call a couple of houses material especially if it has made the balance sheet look much better than it would have done otherwise. That said, there's no tax gain/loss caused by the error.

I assume that they introduced the properties to the accounts via the DLA? Your other option I suppose would be to reverse the transaction in the current year to cancel the effect out.

You said that the mortgage is in the individuals name, and I assume that the properties are also? You don't have a situation with a company owned property with a private mortgage mess?

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Jenny

Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.



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Date:

BudgetB wrote:


You said that the mortgage is in the individuals name, and I assume that the properties are also? You don't have a situation with a company owned property with a private mortgage mess?


Hi Jenny

Thanks for the reply,

On further investigation it seems that this is indeed the case, the deeds are in the name of the Company but the mortgages are in the individuals name under a lease, still trying to get the finer details of why it was set up like this but it seems to be on the advice of the mortgage company, I am trying to work out how the Company actually owns the properties and then gave out leases and have asked for what the solicitors have said.

The properties are now both being rented out and my way of thinking is that because the mortgage for the 'lease' is in the individuals name then the profits from the rentals should be taxed as income to the individual, would you agree?

Many thanks

Doug



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Doug

These are only my opinions of how I see things and therefore should not be taken as advice



Veteran Member

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Date:

the company could have a beneficial interest perhaps

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Riel


Guru

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Date:

Hi Doug,

I had a funny feeling that was what you were going to say! People do like to make things as complicated as possible. I presume the mortgage advisor was trying to get them a cheaper rate of interest than a commercial mortgage.

Generally the person who owns the property would be the taxable person, but if the company has leased the properties to the director (assumed) who is then renting them out then yes I would agree that he is making a private supply of property rental and should be completing the land & property pages of a SA return. If the co is paying the mortgage then those payments would have to go to the DLA I think.

Sounds like this is a case of trying to establish what they thought the end product was going to look like, and then establish the legalities of what they've actually ended up with. Often the two are oceans apart.



__________________

Jenny

Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.



Guru

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Posts: 705
Date:

Riel wrote:

the company could have a beneficial interest perhaps


Maybe, but the company owns them in the first place so generally a BI election would be to move the rental profits away from the company, not towards it.



__________________

Jenny

Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.

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