Property business (Limited company) builds block of flats, sells some and rents the remaining flats.
The company receives income to fund future repair costs from the flats sold, say £200 per flat per year, to cover External decoration every 5 years.
This income received from flats that were sold is banked and carried forward to account for against the expense when incurred.
How should the relevant amount due in respect of the flats that are still owned by the company be treated, both from an accounts and tax point of view?
( Note no money changes hands for this )
Should a provision be created for the liability to build up an amount at the same rate as the income from the sold flats ? And if so will this be allowable for tax relief ?