November 17, 2018

VAT added to cost of house managers from November

The cost of in-house house managers goes up from next month.

Her Majesty’s Revenue and Customs (HMRC) has issued new guidance regarding the payment of VAT for site-based staff at developments.

Applying the correct VAT liability on residential domestic service charges (VAT information sheet 07/18)

This information sheet, together with Revenue and Customs Brief 6 (2018), addresses the incorrect application of Extra Statutory Concession (ESC) 3.18 VAT: exemption for all domestic service charges.

The guidance requires that Property Managers must add VAT on to the cost of site staff collected through the development service change from 1 November 2018

What does this mean for me?

If you have dedicated site-staff at your development and you pay a service charge, this means that the cost for them after this date will have a 20% VAT charge attached. This will not affect the other parts of your service charge, which already include VAT.

Your share of the VAT will depend on the lease at your development. As with all charges, your share will be specified in your lease. The exact amount will be highlighted in your next budget or service charge accounts.

Why are you making this change now?

HMRC has been very explicit in their guidance that changes need to take place from 1 November 2018. We have sought expert tax advice to understand this in greater detail and the findings have made it very clear that all managing agents, including FirstPort, must adhere to the guidance.

Where can I find more information?

To answer any questions you may have, we have also developed some FAQs, available at: https://www.firstport.co.uk/residents-help-and-advice

You can also read the new guidance on the Government’s website here.

Comments

  1. Michael Epstein says:

    This is a further blow(though this time not of Firstport’s making) to residents living in retirement developments.
    Residents will have the VAT now chargeable for development staff costs.
    This could cost residents an extra £150 per year on top of their already excessive service charges.
    Of course whilst Firstport will not financially benefit from this, they do face problems in that Firstport accounts are notoriously known for their inaccuracies?
    That being the case, whilst they may pass of any inaccuracies as an administrative error after errors are brought to their attention by residents or LKP (See Hillside Court Ormskirk)
    HMRC are likely to be less forgiving.
    I feel sure it is not beyond HMRC’s abilities to correlate the amounts being charged to developments for staff and the VAT being claimed by Firstport?

  2. Michael,
    Companies are paid to collect VAT – are they not?
    In my first year in business I was entitled to circa 4% for collecting and paying VAT to HMRC.

    This is a further blow to residents living in retirement developments. What it does say is that we as leasehold residents are not customers as we had been informed by Firstport Retirement as it is clear we are seen as receiving a service, and the customer will be the Landlord.

    As you say Firstport Retirement accounts are notoriously known for inaccuracies, so how will this prevent further inaccuracies as administrative errors brought to their attention by residents or LKP (See Hillside Court Ormskirk).

  3. Since residents living in retirement estates are now required to pay VAT to Government , this is more reason for Government and Housing Minister to provide preferential service to leaseholders and terminate the payment of annual ground rent and clear out the freehold ground rent companies from our lives..

  4. ollie,
    Residents living in retirement developments such as Ashbrook Court where 28 flats all pay towards the 20% VAT (over £2,400) charged on Management Fees since Peverel Group were purchased out of administration.
    We checked with Firstports Chris Owen, who admitted we as a development were not part of the sale to Chamonix & Electra, and Flatlaunch Ltd our Landlord and Firstport our poor Managing Agent were part of the same parent company The Tchenguiz Family Trust.

    Ollie I also agree as we already pay VAT to Government, this is a great chance for Government and Housing Minister provide preferential service to leaseholders and terminate the payment of annual ground rent and clear out the Freehold ground rent companies from our lives, and allow us down the Right To Manage (RTM).

  5. Ollie well posted this is NEWS from today regarding the number of Leasehold Properties.

    Government’s ‘flawed data’ underestimates scale of leasehold home scandal by 50% Sam Barker The Telegraph 12/11/2018:- Leasehold groups say the real figure is much higher?

    The Government is accidentally underestimating the extent of the leasehold problem because official figures exclude millions of homes, according to new research.

    Many leasehold properties require expensive and unfair payments to be made to the freeholder. These can include a yearly ground rent that rises over time, leaving properties unsellable, as well as other high charges.

    In December 2017, Sajid Javid, who was the Communities Secretary at the time, said the Government would set ground rent on all new long leases to zero. But in a consultation last month the Government watered this down. It now wants these to be allowed, but capped at £10 a year.

    Campaigners for leasehold reform want stronger protections and now claim that government figures underplay the scale of the problem. Official figures published by the Ministry of Housing, Communities and Local Government last month said there were 4.3m leasehold homes in England, or 18pc of the total housing stock.

    However, according to statistics due to be published by the Leasehold Knowledge Partnership (LKP), a pressure group, the true number is 6.5m, 51% higher.

    Martin Boyd, of the LKP, said a third of all leasehold homes, or 2.21m, would have some sort of issue with unfair terms. Mr Boyd said the government methodology was “total horsefeathers” and led to figures that underestimated the problem. He said: “Unless you’ve got the right numbers, how do you plan properly?”

    The main reason for the gap is because the Government excludes many leasehold social homes. Government figures say there are 244,000 of these, whereas the LKP says there are as many as 1.9m.

    Government statistics also said there were no new leasehold homes built in 2016-17. The LKP said there were around 50,000. Jo Derbyshire, of the National Leasehold Campaign, an action group, said elderly and social leaseholders were among the most affected.

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