Self assessment - service charge

M03

I am submitting my self assessment for the first time since becoming an accidental landlord. I have put all of my expenses into categories, apart from the service charge (management company for leasehold flat). It's one of the largest expenses so I want to make sure I've used the right category.

It looks like it goes under:

"Rent, rates, insurance, ground rents etc

Includes:

• any rents you pay under a lease of a property that you let
• business rates
• council Tax
• water rates
• ground rents
• insurance for both the property and contents"

though:

"Legal, management and other professional fees

Management fees paid to an agent to cover rent collection, advertising and similar administrative expenses can be deducted."

looks like a potential option.

Is anyone able to confirm? I assume this is a very common expense so I am surprised I can't find clear guidance.

Thanks

user1977

What is comprised in the "service charge"? Insurance and ground rents are I expect included in it. And then you have maintenance costs, which are...another category?

BungalowBel

I always put mine under 'legal, management and other professional fees' because it's a management charge.

Bookworm105

why are you declaring a breakdown of your costs?
did you miss the fact that doing so is optional if the total rent received is less than £85,000?

read the notes in detail so you know how to do it efficiently...

Self Assessment: UK property (SA105) - GOV.UK (www.gov.uk)
" Property expenses You can claim for the running costs of your rental business. If your total property income before expenses (including income from furnished holiday lettings) is below £85,000, you can just add up your expenses excluding any residential property finance costs and put the total (minus any FHL expenses) in box 29"

if your rent is <£85k then your self assessment is 2 boxes:
box 20: total rent
box 29: total of all expenses (assuming they are >£1,000 so you are claiming actual costs rather than the £1k allowance)

there is no need to give a breakdown to HMRC, although obviously you need to keep itemised amounts for your own records to support the box 29 figure.

please confirm you understand how to deal with the mortgage costs - if applicable

Bookworm105

M03 said:

Is anyone able to confirm? I assume this is a very common expense so I am surprised I can't find clear guidance.

BungalowBel said:

I always put mine under 'legal, management and other professional fees' because it's a management charge.

user1977 said:

What is comprised in the "service charge"? Insurance and ground rents are I expect included in it. And then you have maintenance costs, which are...another category?

why?
if you read and understood the instructions before starting filling out your SA none of you would need to even think about what category

M03

Thanks for the clarification on that @Bookworm105 . I have used the online form and despite entering my rent received, it still gave me the breakdown boxes and so I didn't look further than that.

For completeness, the service charge covers buildings insurance, maintenance of communal areas, management of the estate, and I assume would therefore span many categories. However, since it's one bill, I assumed it would be kept as one lump in the breakdown.

Regarding mortgage costs (and all associated finance costs - mortgage product fee, interest, remortgage legal fees, early repayment change) - I believe these are totalled and added to the finance costs box, whereby 20% is calculated and deducted, rather than being an expense. Please correct me if that is not correct 

Bookworm105

M03 said:

Thanks for the clarification on that @Bookworm105 . I have used the online form and despite entering my rent received, it still gave me the breakdown boxes and so I didn't look further than that.

For completeness, the service charge covers buildings insurance, maintenance of communal areas, management of the estate, and I assume would therefore span many categories. However, since it's one bill, I assumed it would be kept as one lump in the breakdown.

Regarding mortgage costs (and all associated finance costs - mortgage product fee, interest, remortgage legal fees, early repayment change) - I believe these are totalled and added to the finance costs box, whereby 20% is calculated and deducted, rather than being an expense. Please correct me if that is not correct 

the online form gives you everything, it is then down to you to read the instructions as to which box to manually populate with data.

As per those notes, single total in box 29 is all you need do, categorised breakdown is irrelevant unless you wish to tie yourself in knots over what to put where when reality is HMRC care little what goes where. If you voluntarily submit a breakdown their computer simply compares that against all other declarations  and will "decide" is it looks "odd". Whether a human then looks at the computer flagged oddity is a very moot point.

thanks, you have treated the interest correctly.

M03

Thanks, I'm learning gradually here.

I have just ammended my expenses. One last question, if you don't mind?

The "Costs of replacing domestic items" is not listed as a property expenses, but rather as an adjustment. I assume due to this I do still lost it separately? Or can this also be combined into the box 29 other expenses total?

Bookworm105

M03 said:

 Or can this also be combined into the box 29 other expenses total?

NO, the boxes are numbered in order. The contents of box 29 are a figure that excludes the contents of box 36 since 36 comes after 29



perhaps it would be wiser to get someone experienced in property tax returns to do this one for you (their fee would be an allowable expense!) and then copy what they did when you go it alone next year
.
Since this is your first property SA return have you REALLY understood what is meant by replacement of domestic items? It would be rather "opportunistic" to, for example, have to buy a replacement item in the first year unless the original was demonstrably beyond repair and no element of "improvement" is involved in that cost.
Read these details:
PIM3210 - Furnished lettings: Replacement of domestic items relief: 2016-17 onwards - HMRC internal manual - GOV.UK (www.gov.uk)

M03

Thanks, I didn't think it was actually but wanted to confirm. I don't have an issue with the reasoning for the costs as they are genuine and relatively low cost in comparison to the other figures. Thanks for the help