Repairs to property and tax

Collapse
X
  • Filter
  • Time
  • Show
Clear All
new posts

  • themanlike
    started a topic Repairs to property and tax

    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

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

    Many thanks

    Leave a comment:


  • leaseholder64
    replied
    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.

    Leave a comment:


  • themanlike
    replied
    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

    Leave a comment:


  • leaseholder64
    replied
    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.

    Leave a comment:

Latest Activity

Collapse

  • Will I pay stamp duty?
    Bricko7
    So i was hoping for some good advice.

    Me and my girlfriend are looking to buy a house together, the problem is i already have a house of my own which i am renting out on a BTL mortgage. So if i buy a house with my girlfriend that will be my second home, but her only home.

    ...
    18-05-2019, 16:02 PM
  • Reply to Will I pay stamp duty?
    loanarranger
    There are a minority of lenders who will accept one person being on the Title but with two persons on the mortgage in order support the affordability , otherwise You cannot circumvent the SDLT premium in the second property is in joint names.
    18-05-2019, 21:34 PM
  • Tax implications of extending a lease at no cost
    LondonLiz
    Hi there

    i am one of four directors of a company that owns the freehold of the four flats in our house.

    one of the owners is selling and wants to extend the lease as its dropped to 67 years. I realise now we should have done 999 leases as soon as we bought the freehold but...
    14-05-2019, 10:12 AM
  • Reply to Tax implications of extending a lease at no cost
    LondonLiz
    Thanks - it would be our preference to renew them all at the same but unfortunately the seller is pushing us as their buyer is threatening to pull out.

    We now have differing advice over whether we will be liable to pay tax on the assumed financial benefit of the extended lease at no cost....
    17-05-2019, 16:27 PM
  • Capital gains tax and tax credits
    alice123
    hi i have recently sold a rental property and have been working out my tax liability for the GCT which works out at 2,500 tax to pay and im a non tax payer and this just takes me over the threshold - ok for tax credits pruposed do i need to declare the captial gain as its a capital gain and not income...
    17-05-2019, 14:29 PM
  • Reply to Capital gains tax and tax credits
    alice123
    update - ive been onto the tax credits for the past hour and they are saying not to inclue unless im re-investing or making money from the capital gains
    17-05-2019, 16:16 PM
  • Is this legal?
    js21983
    Hi all, I am completely new to this so wanted to get some informal advice. I currently jointly own a freehold property in London (with my sister that lives in the US) that I inherited from my mother many years ago. I do not live in the house, not does my sister; until now, the entire property was let...
    15-05-2019, 22:04 PM
  • Reply to Is this legal?
    buzzard1994
    It's permitted, but is obviously designed to evade tax. You need to declare the income you receive from your son - and pay tax on it. What is he going to pay over to you - the full rent or more than he has actually received? For £1500 this is a lot of complications and your son becomes a landlord with...
    17-05-2019, 09:56 AM
  • Reply to Is this legal?
    jpkeates
    Your son is basically renting the property from you, so he can deduct the rent he pays you from his income, so you don’t end up paying tax twice.
    17-05-2019, 07:21 AM
  • Reply to Tax implications of extending a lease at no cost
    Gordon999
    If the freehold title is owned by external party, then the external "freeholder" would charge each leaseholder for lease extension.

    If the freehold company is owned by the 4 leaseholders, the members of the freehold company can agree to extend all flats together to 999...
    17-05-2019, 05:49 AM
Working...
X