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Do tenants pay service charge?

(19 Posts)
ElleDubloo Sun 07-Jun-15 20:14:52

Just that, really. We're doing buy-to-let on our flat, for the first time. Service charge is £130 a month. Can we give the tenant a £130 discount on the rent and ask them to pay the service charge directly? Just because it'll save us paying income tax (40%) and agent fees (13%) on that amount.

Mrsmorton Sun 07-Jun-15 20:17:39

That's what I was led to believe when I started letting a property. As long as they actually pay it...

Mrsmorton Sun 07-Jun-15 20:18:14

But for you its tax deductable so why the income tax? Ive probably missed something

bookishandblondish Sun 07-Jun-15 20:19:59

I've never paid service charge - it's always been included within the overall rent ( three rentals properties).

wowfudge Sun 07-Jun-15 20:20:11

What about you continuing to pay the service charge direct to the managing agent or management company and not involving the tenant at all? With what you are suggesting, what happens if you give the tenant the discount and they don't actually pay the service charge?

PennyJennyPie Sun 07-Jun-15 20:26:17

You pay the service charge. Not sure how you think about tax, this is a cost so deductible against revenue. Can you clarify the agent cost?

eurochick Sun 07-Jun-15 20:27:12

In my experience, the landlord pays.

felkov Sun 07-Jun-15 20:27:54

You'll need to check that the management company will permit someone other than the legal owner to pay.

when we did BTL on a leasehold flat the management co made us continue to pay ground rent and service charges.

As a PP said they are both tax deductible expenses (as are the agents fees) so that shouldn't make any difference to you

tribpot Sun 07-Jun-15 20:28:40

Yes, we pay the service charge on our flat, not the tenants. I wouldn't expect them to pay it.

littleblackno Sun 07-Jun-15 20:33:57

I pay it on my btl. it covers building insurance which as far as I understood was landlord responsibility. If tenant doesn't pay for whatever reason then you won't be covered, I wouldn't want to take that risk.

AugustRose Sun 07-Jun-15 20:38:51

I've never been asked to pay a service charge as a tenant.

ConnortheMonkey Sun 07-Jun-15 20:41:21

It's tax deductible anyway. You only pay income tax on your profit, I.e. Rent less expenses which will include service charge. I wouldn't delegate it to the tenants because you will be primarily responsible if they fail to pay. The management company can still sue you for non payment as the owner of the property. Worth the £16.90 a month not to ruin your credit rating if they don't pay I think.
I suppose you could set the rent at 130 less to be paid via the agents and then 130 to be paid direct to you, but imagine the agents would try and claim their commission anyway as it would need to be in tenancy agreement or you'd have to deal direct with the tenants if they didn't pay which is what you are paying the agent for....

Rubyrooo Sun 07-Jun-15 20:49:20

The landlord usually pays it. As well as being tax deductible, the risk is that if the landlord has passed the cost on direct to the tenant and the tenant defaults, the Man co can forfeit the landlord's long leasehold interest.

EhricLovesTheBhrothers Sun 07-Jun-15 21:00:06

Never been asked to pay it, I would find it a weird annoyance and imposition if I was asked to pay two separate payments instead of one as my rent.

PettsWoodParadise Sun 07-Jun-15 21:33:58

It's important you pay it and not the tenant as failure to pay could mean forfeiture and you've got no paper trail to prove it was paid. Other things you need to be clear on is deposits and providing the right information as otherwise that can land you in a lot of hot water. It is perfectly easy to manage your own rental properties or group of properties even if working full time but you need to do a lot of reading up. I've been doing it for five years and we've learnt lessons, not usually expensive ones, but they could have been!

ElleDubloo Mon 08-Jun-15 09:46:10

OK, that's good to know. I didn't realise that service charge is tax deductible too. Thanks everyone! smile

specialsubject Mon 08-Jun-15 11:33:23

why is your agent taking their 13% on this? That percentage is only chargeable on the rent.

Mrsmorton Mon 08-Jun-15 12:39:07

Because the tenants are paying the rent so the agent charges a % on it. Op as the landlord then pays the tax deductible service charge out of the rent.

PettsWoodParadise Mon 08-Jun-15 18:19:59

We pay an accountant about £120 a year to do our accounts. We provide the figures and he does the rest including submitting to HMRC. We saved a fortune compared to what HMRC calculated we owed them so well worth it. You only get tax relief on the interest of any mortgage not the full amount if a repayment. you can also claim mileage for visits to and from the property etc.

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