Service Charge Trust Fund and TMEs

Is an administration fee allowable against interest income on a Trust Tax Return?

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Dear AW members

Hope you are keeping safe and sane.

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).

The management company wants to offset an administration fee against this income to mitigate the 20% income tax. They have incurred this fee in the course of processing the finance charge levied.

Is this an allowable Trust Management Expense? I understand it’s not.

Your advice would be gratefully received.

Replies (2)

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By Tax Dragon
18th Jun 2020 17:03

Maybe I'm losing the plot ("keeping" sane? you don't know me very well! :-)) but don't TMEs attract relief only at the difference between the trust rate and the basic rate? So, although I think they are TMEs, so what?

I see no basis for deducting the costs from the income.

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Replying to Tax Dragon:
By Steadfast
18th Jun 2020 17:21

Thanks so much TaxDragon for your response which is enormously helpful.

PS: You are clearly keeping sane!

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