Should the service charge for a flat be deducted before calculating the 10%? It's an annual amount amongst the leaseholder, which I guess mostly goes to the upkeep of the building and is carried forward against major repairs. It would not be due by the tenant, but by the leasholder... I am not clear after reading HMRC's guidance.
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For W&T ...
... essentially rent less utilities and property taxes
PIM3210 says
If the landlord pays any expenses that would normally be borne by the tenant, then these are deducted from the receipts to arrive at the relevant rental amount. The type of expense that would fall to be deducted include the utilities bills (gas, water, electricity), council tax or, in Northern Ireland, domestic rates.
The 10% is calculated only on the net rent from the furnished lettings. Any rent from unfurnished lettings is excluded from the calculation as are any expenses from these lettings that would normally be borne by the tenant.
Service charges relate to communal areas, not the landlords property, so they would not be excluded.
Another way to look at it is that the service charge will be there whatever, the utilities etc are dependant to whatever extent on occupation.
So are you saying that service charge should be deducted from rent on furnished lettings before calculating the W&T allowance?
No at all ...
... complete opposite, service charge is not deducted before computing W&T allowance.