Q: We own the freehold of a block containing eight flats. The owner/residents of the flats own the company. We have recently taken control of the company.
We have decided to continue paying the same maintenance charge we paid when we employed an agent. This means that our informal Roof Fund will increase by an extra £3000 or so each year. To date, the amount accumulated has been insufficient to consider investing it to earn interest, particularly considering the level of interest rates. However, the time will soon arrive when it will make sense to do so which will give rise to interest.
We recently received a letter from HMRC stating that we are not liable for Corporation Tax but it also refers to a liability for income tax on interest received from money held on trust and the need to prepare an Income Tax Self Assessment Form. I have spent an inordinate amount of time trying to find out what to do without success.
FPRA Hon Consultant Gordon Whelan replies:
You will need to prepare a Trust Tax Return in respect of the interest earned on this income. However, even with funds of £3,000 the amount of interest earned in the current environment is likely to be minimal. One option for you is to write to your local HMRC tax office and describe your circumstances stating that interest earned for the coming tax year is likely to be very small and that the cost to submit a return would be disproportionate. In view of this, state that you are requesting that the Company’s requirement to prepare a return is waived in the circumstances.
HMRC may agree to the request but there is no guarantee as the response seems to vary from tax office to tax office. Failing this I suggest that you appoint an experienced service charge accountant to act on your behalf.
[Submitted July 2017]