According to HMRC’s SAM100320:
“A property / flat management company may also be liable to income tax at the rate applicable to trusts where investment income arises on residential service charges (known as sinking funds) held in a designated account. This is a requirement of S42 of the Landlords & Tenant Act 1987.”
A service charge trust fund (per S42 of the Landlord and Tenant Act 1987) has received over £1k from finance charges imposed on arrears (in accordance with the lease).
HMRC guidelines seem to state that investment income only is taxable.
Would you say that a finance charge levied on arrears of service charges is taxable investment income?
Your advice would be gratefully received.