Greetings,
What account do I categorise Service Charges under? This is a expense for a Property I rent out and receive rental income for. I currently have these transactions under the default 'General Purchases" but I’m not sure that’s right.
Would appreciate any advice.
Thanks
Nick
Hello Nick
Unfortunately this is not something the support team would comment on as we are not registered accountants.
I will leave this thread open for now as there are some accountants on the forum who may wish to comment.
You don’t say if this rent is the only income going through the accounts, but you should always categorise the expenditure against the income which it supports, so having a separate line for Service Charge & Ground Rent is a good idea, and you may also need additional accounts to record property related expenses like EPC ECIR or repairs.
Just create a new account at 6020 (or near there) for Service Charge & Ground Rent - do this by clicking Reports / Chart of Accounts /
Create New Account / Tick Enter Specific Code /
Then you can post theses costs to a unique line item where it is easy to see the costs to deduct from the rental income
Hi ChrisA14,
Thanks for response.
Rent isn’t the only income (3 separate properties), I also have bank account interest. The rent I account as “4904 - Rent Income”.
Okay so I should create new accounts in “Direct Expenses (6000 - 6999)”. Thanks.
I last year purchased a parking space (leasehold) and accounted for that as “0011 - Leasehold Property”. What account should the conveyancing and related purchase costs go in relation to this asset? I don’t see any 'Conveyancing" or “Asset Purchase Costs” code or similar in COA. Is it best I create new accounts under “Assets and Liabilities (0001 - 2999)” or should it be in another category?
Thanks
Nick
The purchase costs with property can not be charged as an expense, but are added to the capital cost.
If you paid £10k for the space with £900 of costs, you need to record an asset value of £10,900 and keep a copy of your solicitors completion statement.
Then if you later sell it for £15,000 with another £700 of selling costs, your profit is 15000 - 700 - 10900 = £3,400
The costs associated with the purchase and sale come off at that point.
If All your income and expenses are from property it is easier, but if you were also making wooden dolls and selling them at craft shows, you would have to be very careful to keep the income from different sources separate so that one business activity is not subsidising the other.
Ah I see. Thanks for that info. I’ll move those those conveyancing fees to the ‘0011 - Leasehold Property’ account.
One other income I get which I forgot to mention is P2P investment whereby the company invests available cash and receives partial loan repayments over time. What accounts should those out/in transactions go under?
That depends on the nature of the “loan”
If you lend £1,000 which is to be repaid in full in x years time and some rate of fee/interest is paid (say £5/month) along the way, then it is really just a fixed term deposit and you can treat the money coming in as income just as you would if you put £1k in the a bank savings account and they were paying you £5/month in interest.
However, your use of the phrase “partial loan repayments” suggests that the company isn’t making money from this.
In posting terms it is easy. Create a new account called xxxx loan using the bank menu.
Credit your bank £1k and debit the loan account £1k
Every time a repayment of £5 goes into your bank account, treat it as a loan repayment by tagging it as a transfer between accounts between the bank and the loan account, that will reduce the balance showing as owing on the loan by £5
Sometjing to be wary of though… You dint say if this is a Ltd company, but it is clearly “lending” this money and unless the business has one of its objectives (in the A & Ms) as doing good in some way, these loans need to be in some way beneficial to the company otherwise they start to fall into the remit of charity…
You can still do it, but there are rules about disclosing them and particularly if you have to write any off, and that is outside of my area of knowledge
Hi ChrisA14,
Thanks for the info.
I shouldn’t have said ‘partial loan repayments’ because I misled you. The whole loan would be expected to be paid back with interest minus P2P admin fees.
Yes I am a LTD company and the loan repayments will include interest. The P2P investment was just an alternative way to make money sitting in my company bank account grow as oppose to putting in savings bank account. I do both. So it sounds like I treat it like bank account interest…
The P2P company (the contact between loaners & loanees), has now actually gone into administration. The administrators are slowly gathering loan repayments and distributing to us investors (loaners) but we will never get back the full loan we paid out. 25% of loans paid back at best.
In which case, it’s not really a loan it’s an investment, a bit like the fixed term investment mentioned by @ChrisA14 so I would put the original amount in the balance sheet as an investment, and treat the repayments as a drawdown, reducing the amount on deposit, with the interest treated like bank interest.
Hi cbstephensaca,
Okay thanks for that. I can’t seem to switch the journal accounts retrospectively from loans to investment in Quickfile but going forward I’ll account amounts paid to P2P company as “Investment” (COA 1104) under “Assets and Liabilities” category and amounts received from P2P company (repayments & interest) as “Income from investment” (COA code 4906) under Sales category.
Thanks
Nick
I think the problem you are going to have (and this is far outside my area of knowledge) is that if only about 25% is ever going to be repaid, you are going to have to write off most of the loans.
I don’t believe these will be deductable for corporation tax. Even if the platform was FCA regulated, you could only write off the losses against interest you had received from other p2p loans and I suspect it wasn’t.
This article explains it better that I could
You need a subscription to read the article 
The repayments of capital are not income, they reduce the amount invested. Only the interest is income. Given the likelihood of the company not being able to recover the debt in full, you will need to speak to an accountant who has specialist knowledge in this area. Limited companies may be able to claim a deduction for any losses under the Loan Relationships regime (more detail in the Corporate Finance Manual at CFM30000) but you would need to take specialist advice.
I don’t have one and it let me read the extract… You don’t need the technical detail to understand that you can’t do it. It says this
115-550 Relief for irrecoverable peer-to-peer loans
Peer-to-Peer (P2P) lending is the practice of connecting investors with money to lend (invest) with individuals or small businesses needing to borrow, via on-line intermediary service providers who charge an arrangement fee. Investments are broken down into multiple small sub-loans spreading the risk of default across several borrowers.
There is a tax relief for irrecoverable peer-to-peer loans, which puts the taxation of income received on P2P loans on a comparable basis to the taxation of income received from other economically similar forms of investment, such as collective investment vehicles.
The relief allows investors to set losses incurred on irrecoverable loans against interest received on loans repaid, with the result that investors will be taxed on the income they receive in the same way as if those loans were held through a collective investment scheme.
The relief is available for loans becoming irrecoverable on or after 6 April 2015 (although a claim is needed in respect of amounts becoming irrecoverable before 6 April 2016) and is given via a deduction against net income at Step 2 of the income tax calculation (see ¶148-400).
The provider (platform) must be regulated by the Financial Conduct Authority in order for the loans to be eligible for the relief.
That’s only for individuals subject to income tax I think, not companies
Thanks cbstephensaca,
So only the interest part of money coming in should be regarded as income (4906 - Income from investment). Yes, that makes sense. This was why I accounted the payments to P2P and subsequent capital repayments from P2P as Loan.
Thanks ChrisA14 for posting that article, I couldn’t access it.
Oh just for individuals? No good for me then as I’m a LTD company.
No, but see my comment above
Why would you think that? You aren’t just assuming because of the use “person” are you?.. From the Companies Act 2006
(5)A “legal entity” is a body corporate or a firm that is a legal person under the law by which it is governed .
So Companies meet the definition of “person”