Hi all,
Might anyone have a model showing how they have underwritten UK corporation tax for a stabilised asset producing income?
Appreciate that for developments one can simply do 25% times the gross profit upon disposal but for stabilised assets it would be interesting to see how people do this and write off certain expenses etc.
Based on the most helpful WSO content, there isn't a specific model shared for underwriting UK corporation tax for stabilized assets producing income. However, here are some general considerations you might find useful:
Taxable Income Calculation: Start with the Net Operating Income (NOI) of the stabilized asset. Adjust for allowable deductions such as interest expenses, depreciation (if applicable under UK tax rules), and other operational costs.
Capital Allowances: In the UK, you can claim capital allowances on qualifying expenditures, which can reduce taxable profits. This is particularly relevant for plant and machinery within the property.
Interest Deductibility: Ensure compliance with the UK's Corporate Interest Restriction (CIR) rules, which may limit the amount of interest expense deductible for tax purposes.
Loss Carry-Forward: If the asset or entity has accumulated tax losses, these can often be carried forward to offset future taxable profits.
Tax Rate: Apply the current UK corporation tax rate (25% as of 2024) to the taxable income to calculate the tax liability.
Deferred Tax Considerations: For stabilized assets, consider deferred tax implications, especially if there are timing differences between accounting profits and taxable profits.
For developments, as you mentioned, the approach is more straightforward, applying the tax rate to the gross profit upon disposal. For stabilized assets, the process involves more detailed adjustments and considerations for ongoing income and expenses.
If you're looking for a detailed model, you might want to explore WSO's financial modeling resources or reach out to professionals in the forum who specialize in UK CRE taxation.
Sources: The insanity of the US tax code: Bad Laws and Predictable Consequences, Write Down of PPE by 100, Asset Write Up Impact on Balance Sheet - IBD Technical Question, How do Tax abatements make projects feasible?,
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