Charging a management fee for rental property?

Can a management fee be charged by a Ltd Company for a personally owned rental property?

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I have read that it is possible to charge a management fee at market rate (say 15%) through a Limited Company for a rental property personally owned but wondered if anyone could help me with the following:

- Are there any consequences if this is done through a current trading company? Could it invalidate a future ER relief claim?

- Would a legal contract need to be drawn up between the company and individual (I seem to have read this somewhere)?

- What about PIM2080 which states "A landlord can’t deduct anything for the time they spend themselves working in their own rental business". So surely if it's their Ltd company then this seems to imply that they couldn't do the above arrangement where the company director and rental property owner are the same person?

Thanks in advance

 

Replies (3)

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By johngroganjga
11th Dec 2017 08:55

Presumably, although you don't say, the owner of the property is a shareholder in the company.

Yes a company can provide property management services and is not precluded from doing so where the client is one of its shareholders. Property management is a trading activity, and so does not disturb the company's status as a trading company.

Or is your question about a company charging fees for property management services without actually providing any such services?

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By Emmamay106
11th Dec 2017 09:30

Thank you for your quick reply,
Yes- owner is a sole director/shareholder.
They would be looking after the property and arranging lettings as well as organising repairs/maintenance.

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By Vaughan Blake1
11th Dec 2017 10:08

On the basis that it is a commercial arrangement there should not be a problem. However, 15% sounds a little high especially if VAT is to be added.

Also, assuming that the properties are residential/non opted commercial, any VAT paid on the fees will not be recoverable by the landlord.

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