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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4996
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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The lessees of 4 flats own the freehold of the block of flats

Customer Question

The lessees of 4 flats own the freehold of the block of flats and the driveway, and access to the driveway is shared with 5 other properties. The freeholders/lesses of all 9 properties contribute to the maintenance costs of the driveway. A legal agreement has now been drawn up for this, and the freeholders/lesses of the 5 other properties will need to see the annual accouts for the driveway. Will it be necessary to have a separate bank account for the maintenance costs of the driveway.
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

It all depends how you operate any agreement at present. If there is no special arrangement in place, then a separate account albeit not necessary would be helpful to alleviate any misunderstanding and it would also promote transparency.

It would be a good practice to separate funds used for common purpose and it makes accountability that much easier and straight forward.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 2 years ago.

Many thaks for your prompt reply. If a separate account is not used, how would you recomend notification of costs incurred, and current value of maintenance fund.

Expert:  taxadvisor.uk replied 2 years ago.

Brian, thank you for your reply.

A bank account should be sufficient to record all incomings and outgoings in the first place.

What is important is that each activity is clearly identified and inflow and outflow of funds is allocated to activity as appropriate. Maybe on a quarterly basis some internal statement is prepared (management accounts) that reconciles movement of funds to activities undertaken.

A competent book-keeper should be able to provide this service at reasonable cost.

I hope this is helpful.

Customer: replied 2 years ago.

Are you suggesting that the private bank account for the 4 flats would be sufficient? I note that it is important for each each activity to be clearly identified and inflow and outflow of funds is allocated to activity as appropriate. Obviously the freeholders/lesses would not have any access to this bank account.

Expert:  taxadvisor.uk replied 2 years ago.
Brian, a private bank account can suffice provided all incomings and outgoings are clearly indentified.

The freeholders/lesses may not have access to this bank account.
The accountant/committee managing the maintenance project would/should have as good accounting practice.

The members would be provided with management reports that would clearly explain how the funds have been utilised at any given point and what is left in the maintenance fund.

Transparency is the key ..

I hope this is helpful.
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