Good afternoon, I would be grateful for any advice on the following.
I live on a private estate with circa 100 properties. The estate is in excess of 300 acres and takes some managing. Therefore a number of years ago the residents got together and formed a limited company to purchase all the land and form a management company with 100 shares. The only shareholders are residents. The rationale is that an external management company would levy charges allowing them to make a profit which would potentially see ever increasing service charges. The estate residents do a lot of the work on the estate themselves on a voluntary basis and tender out for work beyond the skill set of the residents.
One area that clearly requires external contractors is road maintenance, hence there is a reserve fund that is accumulating ready for when major road repairs will be required. This reserve fund is created by income from service charges and leasing of some of the land to farmers. This means the Management company is making an annual profit which is taxable. As the whole concept of forming the company was to keep costs to residents down it seems somewhat ludicrous that we have paid tax in to the tens of thousands in the last two years. Ultimately over a period of time each household will have contributed 4 figure sums in service charges that directly go in tax.
----- Is there a way of creating a separate line item on the service charges that is allocated for road maintenance that effectively does not form part of the annual turnover/income so is not taxable?
----- Or is the only realistic way to reduce tax liabilities to perform road maintenance in smaller chunks every year thereby bringing the annual profit close to zero as opposed to building a road maintenance "war chest' to fund the inevitable potential 6 figure sum to do a big road maintenance project in a number of years time?
I appreciate this is a very loose description of the issue, but any advice/thoughts would be gratefully received.
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