Bank interest and commercial service charges

Who submits tax returns for bank interest earned from holding funds in reserve fund bank accounts?

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I would like to know what happens with bank interest earned on service charge bank accounts for commercial properties? Does the accountant preparing the Certificate of Expenditure (appointed by the managing agents) for a commercial property have any duties in this regard? I assume it is up to Landlords to inform their own accountants of bank interest earned over £500 for which tax returns are required to be submitted.   

The Landlord would receive an annual Certificate of Expenditure from the managing agent of a commercial property. The Certificate would have been reviewed by an independent accountant who would have been appointed by the managing agent. 

As regards services charges for residential flats, the service charge bank account is a deemed statutory trust. The accountant preparing the residential service charges would prepare and file a Trust Tax Return for any bank interest earned over £500.




Replies (4)

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paddle steamer
21st May 2024 14:08

Depends whose bank account.

If agent has a client account to manage a commercial property that has interest received I would expect them to pay any tax due on interest received, it is their account, however I would also expect agent to account to the tenants for the net interest received as a deduction from costs incurred when re billing costs/issuing invoices if the funds had been supplied by the tenants.

When we acted as commercial property agents/managers, and had funds in distinct accounts, we never bothered getting interest but it was back when rates were low and doubt we ever held more than £20k in an individual account.

I never viewed the tenants in say a commercial property we managed as ever having an interest in the bank account used but more we acted as their creditor when they rarely had paid in advance and as a debtor more often when we had placed the float into the bank account and it was actually our cash- at the end of the day we were liable to the bank if the account went overdrawn, the tenants were not.

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Replying to DJKL:
By Steadfast
21st May 2024 14:39

Many thanks for your advice and taking the time to respond.
The agent does have a client bank account but the agent doesn't have the Landlord's UTR, permission, etc, to be in a position to ask the service charge accountant prepare and file a tax return. I agree, any tax paid over should be charged back to the service charge.
The bank interest is credited to tenants (and to the landlord for any voids) when the balancing charges/surpluses are calculated at the financial year end. A provision could be included for tax due due.

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By Paul Crowley
21st May 2024 14:24

I would not be concerned at all unless the interest per member was not immaterial.
If you want the accountant to register a trust with HMRC and file trust tax returns then expect an increase in fees.
There is significant variation in how the accounts are dealt with on service charge companies, few of which are actually wrong.

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Replying to Paul Crowley:
By Steadfast
21st May 2024 14:42

Many thanks Paul for your advice.
Yes, I agree, the accountant should charge extra to register a trust with HMRC, etc, but with commercial properties there is no deemed statutory trust.
I think the answer is that it's the responsibility of landlords to include the interest in their tax returns.

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