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Service charges accounts

Do they need a separate entity being setup?

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Our client is a limited company with flats on a long lease from a parent company, which are then rented out to individual tenants on a short lease terms.

Do we need to set up a new building management company to manage service charges? Could that be done using the subsidiary company with a dedicated bank account for any receipts from tenants and any payments made with regards to service charges, with a reporting in Xero being set up in a way to produce the annual service charge statements issued to tenants? Tenants themselves do not require anything but we want to ensure the company complies with any legal requirements.

Any comments or thoughts would be appreciated. 

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By dejaneiro2005
13th Jan 2020 16:34

What does it say in the long lease regarding service charge accounts?

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Replying to dejaneiro2005:
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By The_Enquirer
13th Jan 2020 17:31

Long lease is from parent company to 100% subsidiary. Long lease does not say anything about service charge accounts. Thanks

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Hallerud at Easter
By DJKL
13th Jan 2020 17:35

Do the short leases describe what is to be billed re services and to who and how often?

What do you mean by short leases?

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By jwgrogan
14th Jan 2020 18:09

For such a usually relatively simple accounting situation, this is a complicated and, I believe, unresolved issue at present. ICAEW guidance (Tech Release 03/11) suggests that service charge monies are held on trust by the landlord, and that they should therefore not be included in any limited company accounts. Some accountants follow this advice and prepare a dormant set of company accounts, and a separate set of trust accounts for the service charge figures. Other just do what they have always done and include service charge figures in a set of management company accounts. You'll have to do the reading and decide for yourself. You can rely on professionals to get involved and turn a straightforward matter into a complicated solution that no leaseholder is ever going to understand.

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