Is this an allowable property expense?

Is this an allowable property expense?

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Landlord's expenses include a 2014/15 bill of around £1,250 for a business rates savings scheme.

I asked estate agent what this relates to. He said this was a fee paid to an "arranger" for part of my client's property to be let to a charity on a year by year basis (this is the first year). There is then a lease back to the landlord and there is a large saving in business rates in the process. It seems the fee is somehow related to the amount of rates savings there are. I have little knowledge of business rates so am not exactly sure how this scheme works.

This is the first time I have come across this type of expense. Is it allowable as a property income deduction. This seems to be the first year of payment.

The lease can be renewed on a year by year basis.

Estate agent assures me this is a fairly common practice.

Replies (5)

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By Mouse007
11th Dec 2015 19:06

Stand back

and think about it

 

You're looking for an elephant in the room.

 

 

 

 

 

Doesn't it seem a tiny winnie little bit illegal ? I think you should accrue for the full business rates, once the council find out what's going on the bill will come back. No doubt the "arranger" will have vanished by then.

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Replying to Justin Bryant:
By penelope pitstop
11th Dec 2015 20:19

But the Council DO know about it !!

This is exactly the question I raised with the estate agent.

The estate agent said that this is a fairly common arrangement although I have never heard of it before.

I asked the estate agent what the local authority thought about it and he said they came in and inspected the arrangement. When they were happy with the arrangement the local authority reduced the business rates.

So it all seems to be above board.

 

 

 

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By Mouse007
11th Dec 2015 20:54

It smells

The line I don't like is "There is then a lease back to the landlord". Did the council see that and who exactly is occupying the property?

Now consider the risk to the charity highlighted here and here and the twist of a lease back to your client.

You may also find this interesting.

If it was my client I would warn them that it sounds risky and suggest they take legal advice. I ducked getting involved in Employee Benefit Trusts a few years back, they stank too. So glad I did.

 

To answer your question however I would say yes, its an expenses incurred in the business. I'd just be more worried something else.

 

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By 3569787
03rd May 2016 15:55

Yes its common

.

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Portia profile image
By Portia Nina Levin
12th Dec 2015 13:06

There is no loophole in the law. Charitable rates relief is available where the property is "used for charitable purposes". Unless the charity is obtaining some benefit, it does not seem to be being used for charitable purposes, and so what you would then have is a fraud.

What am I saying! The estate agent (who are pillars of our society, but will sell their grannies for a fiver) said it is fine.

You need to be sure that no crime is being committed. If there is, then the expenditure is precluded from deduction by ITTOIA 2005, section 55, and you have a report to file.

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