Business Asset Valuations

A business purchase transaction represents one of the few opportunities businesses have to reset the value of their plant and equipment assets. This action can in many circumstances result in an uplift in the tax cost base from which depreciation is calculated.

Failing to revalue these assets could result in the business foregoing significant tax depreciation deductions and therefore paying much more tax than they should as the business continues trading.

The option of adopting appropriate market values as determined by an independent plant and machinery valuer at the very least requires consideration. The alternative practice of simply adopting the previous operations depreciation schedule could lead to a loss of possible depreciation deductions along with some other benefits of having a current plant and equipment valuation from the businesses outset.

Some of the benefits of conducting asset valuations at the time of business purchase or shortly thereafter include;

  1. Depreciation benefits – Provides the only opportunity to reset the plant and equipment asset tax cost base. This purchase price allocation exercise adequately considers the value of the assets on a continuing use basis as at the date of purchase.
  2. Confirm all assets – An important part of due diligence assisting the purchaser to both clarify what assets are included in the sale and the market value of those tangible assets. The plant register provided can be used as part of the business sale agreement or as an important asset management tool into the future.
  3. Strategic and tax planning – Knowing the value of your assets is an important part of business planning particularly in understanding potential future taxation liabilities such as capital gains tax.
  4. Risk minimisation – This is also an ideal time to conduct insurance valuations to ensure that all of the businesses tangible assets are adequately covered.

When should a plant and equipment valuer be engaged for determining the asset tax cost base?

  1. Before a sale is completed so that the provided values may be used to allocate values within the sale agreement. Or;
  2. After the sale but before completion of the new operations first tax year in situations where an unallocated sale contract has been requested. (In most circumstances this option is preferred by both parties, however this option should be discussed with your accountant)

PM Valuations specialises in providing businesses with valuation and other associated services for:

  • Land and Buildings
  • Plant and Equipment
  • Fixtures and Fittings

Please feel free to contact PM Valuations to discuss any queries you may have. We can assist to determine possible requirements or benefits that valuations of the assets included within your particular business transaction may present.