Management Charges as an alternative to Interest Payments?

by Readers Question

16:40 PM, 1st May 2016
About 2 years ago

Management Charges as an alternative to Interest Payments?

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Management Charges as an alternative to Interest Payments?

I have been the main funder of some student properties with a business partner. We have a share of profits from both income and capital appreciation. I put up the deposits for the mortgage, and I paid all the up-front refurbishment costs prior to letting.alternative

For the last few years I have been charging each house with an interest charge for the funds I have in them at 5% and this has roughly equated to the mortgage interest rate too.

Now that we are unable to recover interest fully, I wonder if I can make a Management Charge rather than an interest charge.

Does any have any tax experience to say if this would stand up ?

The fact that I am having to declare the Interest or Management Charge does somewhat negate the effect, but there might be other costs or losses that I can put against them.

Any ideas?

Bill



Comments

Neil Patterson

16:49 PM, 1st May 2016
About 2 years ago

Hi Bill,

It sounds like you have a partnership so we may be able to assist if you see our page "Partnership incorporation with no CGT or SDLT"

See >> http://www.property118.com/partnership-incorporation-no-cgt-sdlt/85910/

The ability for landlords trading as partnerships to avoid CGT and SDLT at the point of incorporation is clearly written in legislation. You just need to know where to look to find the information and to employ the services of an experienced tax adviser to claim the various allowances for your business.

Charles de Lastic

11:02 AM, 3rd May 2016
About 2 years ago

It seems to me that it would depend on how you charged the management charge. Through a company or as self employed earnings. Either way there will be tax involved. There are pros and cons of each route and so specalist advice is essential.


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