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


          • CGT - when value of house is taken from
            Hi all,

            Hoping you can clarify for me. I bought a house about 8 years ago, and moved out 4 years ago to move in with my wife, and rented my old house out.

            My understanding is if i sell the old house, the CGT is paid on the difference between purchase price, and sale price...
            12-05-2019, 20:28 PM
          • Reply to CGT - when value of house is taken from
            Thanks all, yes I'm aware of the tax changes due next april, so have put the house up for sale already Unfortuntely the market seems to be dead as a doornail !...
            21-05-2019, 20:32 PM
          • legal fees offsett my rental income ?
            Hi all , i had some legal fees to pay which were about 1,500 , which were due to the fact that the tenant was suing me over the deposit, and i also had some legal fees in respect of tracing the tenants arrears . I did wonder if i may offest this against my rental income on my tax return (which was...
            21-05-2019, 20:23 PM
          • Higher tax bracket
            I will be a brand new landlord soon and wasn't sure if what I'm doing is correct (best for tax reasons)

            I have two properties

            1) Bought Feb 2017 (£185,000 24% equity) residential for me to live in
            2) Bought May 2019 (£150,000 25% equity) buy to let

            21-05-2019, 15:10 PM
          • Reply to Higher tax bracket
            When you are married, you can organise your tax affairs to suit your new situation - finding a good local accountant might be a sensible first step. Or a family solicitor (because you want your wills to be sympathetic and you might want to change how the property is owned.)
            But SDLT will be an...
            21-05-2019, 16:22 PM
          • Reply to Higher tax bracket
            My fiance earns £35,000 so she's not too far from the bracket but we do intend on having children pretty early on.

            I've never talked to anyone about transferring it over to a company, any ideas how difficult it is. I've just paid £5,000 on stamp duty for this property and have a feeling...
            21-05-2019, 16:04 PM
          • Reply to Higher tax bracket
            Does your fiance earn the same (or more)?

            The most tax-efficient outcome is likely to be to manage the properties through a company, but the costs of moving from where you are now to that position are quite high (but one off).

            It might be worthwhile talking and working it through...
            21-05-2019, 15:58 PM
          • Deed of trust to Ltd company
            Hello All,

            I’m new to this site/forum so apologies in advance if this question has been asked before.
            i own my current property 100% and it’s on a personal mortgage. Now I want to move from the property due to personal reasons and want to let it out. I want to do BTL via company...
            20-05-2019, 17:11 PM
          • Reply to Deed of trust to Ltd company
            "BTL via company option" needs some further explaining.
            21-05-2019, 08:36 AM
          • Reply to Deed of trust to Ltd company
            You need to post the terms and conditions of your mortgage for anyone to be able to answer but it is likely you will be breaching the terms and conditions if you don't inform them....
            20-05-2019, 18:21 PM