Repairs to property and tax

  • Filter
  • Time
  • Show
Clear All
new posts

    Repairs to property and tax

    Hi there,

    I am new, but have been referred here as a good place to get advice on everything Landlord related.

    Does anyone have any advice on the below, please?

    I and two others own a leasehold flat each in a converted building (big house)
    We are also directors of the company that owns the freehold
    We issue the leases, manage and maintain the property
    We charge a nominal amount (£50 per flat per month) service charge at present
    We (the Ltd co) has a £9-11K bill to fix the fire escape (communal)
    We have to pay this as directors of the Ltd company as the Ltd company doesn't hold that amount of capital
    Can this cost be passed on to the leaseholders (who are ourselves)
    And that cost be taken off the respective leaseholder tax liability in the financial year it is incurred?
    If it can be passed on, does it have to be a monthly increase to the ground rent/service charge or a lump sum?

    I'd appreciate any help and can provide further info if required.

    Many thanks

    I think you have rather more problems than just tax!

    You cannot charge a nominal service charge. The service charge needs to be based on realistic estimates of the cost of doing those things that the the lease requires the freeholder to do, and under and overestimates should be corrected such that, in the long term, the leasholder only pays the amount due.

    Under a normal lease, the service charge money never belongs to the company. It is held in trust.

    For the rest of your questions, we need to see the actual wording of the lease as far what can be paid for from the service charges is concerned, but I rather suspect you have defective leases.

    Validly charge service charges are allowable against the costs of a business use of the flat. They are not allowable against the costs of owner occupation.


      Thank you for your response, I appreciate it.

      Let me correct myself when I say nominal - that number is calculated based on long terms works that need doing on the property (painting in the communal areas), and ongoing maintenance (gardener, cleaner - for communal areas). We never keep a large balance and submit audited accounts to companies house every year via an accountant. We don't take any money from the account, that is all spent on the property.

      In principle, given on the fact that the repairs are required, can we pass this cost on to the leaseholder through increasing the service charge?

      Interested to understand what makes you think we have defective leases? If the leaseholders are ourselves, is this an issue?

      I will dig out the lease too.

      Many thanks


        With a normal lease, the money would not appear on the company balance sheet, so would not be visible to Companies House. It would be held under a statutory trust (L&T 1978 s42) and any interest would be taxed at discretionary trust rates (currently nil where the the tax would otherwise be less than £100).

        Keeping a balance from year to year requires specific terms in the lease permitting sinking or reserve funds.

        In general your questions cannot be answered without seeing the details of your leases.

        There are possible unusual arrangements in which the money is not a service charge, but we would need to see the company articles, for that, and I'm not entirely convinced you can evade landlord and tenant law, that way.

        Note that, for service charges, a £3k+ charge per leaseholder, you will need to do a section 20 consultation.

        A typical lease would have a clause requiring payment within a few weeks of demand of any excess service charge, but we don't even know whether the money in question can be charged as a service charge, or whether your lease does have a clause allowing immediate, supplementary, demands.


          Thank you, that provides more clarity - appreciate it. I will review my lease and come back with further info.

          Many thanks


          Latest Activity


          • tax responsibility and allowable expenses
            Hello, wondering if anyone can help.

            Firstly, my husband and I are joint owners of our rental property but I heard that we can change things so the tax is based on my income alone. Is this true? If so how can I go about arranging this. I earn alot less than my husband.

            23-04-2019, 20:58 PM
          • Reply to tax responsibility and allowable expenses

            I think you really are " THE ONE " with superior knowledge on tax matters by being able to respond to a far wider range of questions.

            Replying to your question, my thinking ( and I could be wrong ) is :

            When you claim mortgage interest on...
            24-04-2019, 21:36 PM
          • Reply to tax responsibility and allowable expenses
            I bow to your superior knowledge (as always).

            Could you point me at some reason why, because I would have thought that it would be allowable?
            It's essentially the same as a business remortgage....
            24-04-2019, 12:52 PM
          • Reply to tax responsibility and allowable expenses
            Q1. if you are given tax return SA211 2019 to complete , then read the section 6.1 ( property let jointly ) ,

            Q2. No, its too late. It only allowable if you had use the money raised from house to buy the property.
            24-04-2019, 11:57 AM
          • Reply to tax responsibility and allowable expenses
            If you are the landlord and your husband isn't, the income would be yours.
            It becomes a little more complex if it's paid into a joint account.

            Essentially, tax is paid on beneficial income, so if your husband enjoys the results of the income, it's really his income as well.
            24-04-2019, 09:30 AM
          • Moving into my Buy to Let
            I’m considering selling my primary residence and moving into my buy to let. I then will want to sell the buy to let in a couple of years time and then buy a new primary residence outright. Reason for this is to consolidate my assets and buy my next family home outright.
            My question is will...
            22-04-2019, 17:23 PM
          • Reply to Moving into my Buy to Let
            The gain achieved during "primary residence period" is exempt for cgt. .

            The gain achieved during the BTL period is liable to cgt at 18% or 28%

            Primary residence can be claimed for the period in residence plus up to 9 months after moving out
            24-04-2019, 01:39 AM
          • Reply to Moving into my Buy to Let
            By taking full advantage of the tax relief for private residences and selling before they need to pay tax. You used to be able to designate whichever property you wanted as your main residence. The last 18 months of occupation is currently tax free - that is dropping to 9 months in 2020. It used to...
            23-04-2019, 21:49 PM
          • Reply to Moving into my Buy to Let
            They don't actually avoid it, they do what anyone can do if they live in more than one place.
            You can nominate one of them to HMRC as your primary residence - because you're only allowed one property as your "primary" residence.

            While that costs you CGT on the other one,...
            23-04-2019, 11:54 AM
          • Reply to Moving into my Buy to Let
            How do politicians get away with paying no CGT on their second residences?
            23-04-2019, 10:04 AM