RESIDENTIAL BLOCK MANAGEMENT COMPANY

RESIDENTIAL BLOCK MANAGEMENT COMPANY

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Rents receivable by flat management companies (such as ground rents - other than peppercorn rents) are outside the scope of LTA87/S42 and remain chargeable under Schedule A.

This is my understanding but the reason i ask is that i have acquired a new client block management company they have acquired the freehold and still charge ground rent but the previous accountants have not calculted any Ct on this is there an exemption the amont cherged PA is £1995.00 on 30 flats so it cant be classed as peppercorn.

 

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Euan's picture
By Euan MacLennan
05th Sep 2011 14:20

No exemption

The de minimis for unincorporated associations to be subject to CT is £100 of tax.  If you scroll down, you will see that this treatment is extended to Property Management Companies, but not only has your company got nearly £400 of tax to pay (assuming that £1,995 is the total for all 30 flats), but there is a specific exclusion for companies with income from land.

So, I agree with you.  No exemption from CT applies to your company.

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By uktaxpal
06th Sep 2011 07:50

mutuality
COuld the principle that you cannot make a profit out of yourself apply here as the shareholders are also the leaseholders.Maybe a good time to vary the lease/ground rent but dont fiorget non service charge income is required to pay non service charge expenditure.

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By abelljms
06th Sep 2011 08:08

it's a Miss Terrry situation

 

 

7.8 Mutual Business

The rules relating to mutual trading do not apply to property income, and

the Computational rules therefore apply as if there were no mutual relationship (s.321(c) ). HM Revenue & Customs have stated in Tax  Bulletin Issue 37, Oct 1998 that residential service charges received by occupier-controlled flat management companies are not taxable, since under correct accountancy principles the landlord is not beneficially entitled to the receipts. Such sums are to be treated as capital in the landlord's capacity as trustee, and interest arising in a designated bank account be subject to tax at the trust rate (Landlord & Tenant Act 1987 s.42), Rents receivable by these companies are taxable.

 

NB. Trust Rate of Tax ?! not on first £1,000 of income.

http://www.hmrc.gov.uk/budget2007/bn41.htm

 

 

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By uktaxpal
06th Sep 2011 10:02

costs?
There will not be any A profit to tax as the fmc will need to pay landlords costs.e.g.buildings insurance.

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