Management Fees

[bob]

Hi all
I own 2 properties which are rented and i manage them myself.My query is can i pay myself a management fee of say 12% and deduct this as an expense and reduce it from my tax bill?
Many thanks.

[mart]

Nice question- I'd like to know the answer to that.

mart

[tenant29]

Bob,

The management fee ( deducted from the rental income ) is still part of your income and will not make any difference to your tax bill.

[Tax Accountant]

Hi all
I own 2 properties which are rented and i manage them myself.My query is can i pay myself a management fee of say 12% and deduct this as an expense and reduce it from my tax bill?
Many thanks.

You cannot make a profit from yourself, ie you cannot pay yourself a wage to manage your own property unless this is your normal business.

Even if you were allowed to pay yourself a fee, you would have needed to declare this as your earnings. Therefore, you would be back to square one.

Ramnik

[johnj]

Are you married by any chance?
What about a service company, perhaps.
Dont give up yet

[MrWoof]

I let one property owned by myself and a small number through my own limited company, the company manages my own property. The first year, my accountant allowed the company to charge me a 10% management fee but has now said that the IR do not like the arrangement and no longer lets me do it.

[brookslrj]

I too am in a similar position in that I do most of the management for my houses myself.

As a 40% taxpayer I thought about paying my wife (not working with 2 small kids!) an amount per month for 'management'. Provided this was under the threshold for tax she would have to pay any tax on this income and I can deduct the cost from my rental profits?

I also thought about setting up a limited company for the same purpose but my accountant wanted between £600/£1000 per year to do this.

Does anybody else do this?

[Tax Accountant]

I too am in a similar position in that I do most of the management for my houses myself.

As a 40% taxpayer I thought about paying my wife (not working with 2 small kids!) an amount per month for 'management'. Provided this was under the threshold for tax she would have to pay any tax on this income and I can deduct the cost from my rental profits?

I also thought about setting up a limited company for the same purpose but my accountant wanted between £600/£1000 per year to do this.

Does anybody else do this?
Hi,

You cannot just pay your company or your wife just because it is tax efficient to do this.

First of all, you have to incurr the expense, ie you should be charged for the work done and then you should physically pay it as you would normally pay anyone else.

Then you have to justify the expense as incurred 'wholly and exclusively' for the purpose of your business. The main issue is that the receiptient should provide the relevant service for which the amount is paid. Then, you would need to satisfy whether you would have paid the same amount for the same service had it been performed by an uncommected third party.

Only if you satisfy these requirements, you will be able to claim the expense as deductible from your income.

The receipient should then declare the income as their income from their trade or profession. If it is your wife, she may need to register as self-employed.

But it is true that the tax office generally do not like amounts paid to your company for the work done by you personally. It is arguably work done by you for yourself and you cannot normally profit from yourself, ie you cannot pay yourself.

Ramnik