ABSTRACT
Some major tenants regard reserve funds as unnecessary, since they are prepared to meet a variable service charge on the basis of cost incurred, knowing that overall they will make the same contribution. The foregoing assumes that a given lease provides for the creation of a reserve or sinking fund in the first place. It seems that the tax system has no fixed provisions for a sinking fund, that is, a fund for future expenditure, with its estimates and future provisions. A separate management company could be established by the tenants, or possibly even the landlord, and could be treated favourably for tax purposes were it to have "mutual trading" status. Expenditure on capital items cannot generally be set against tax in the same way as maintenance and repairs in general. The Inland Revenue will sometimes require the landlord or managing agents to account for tax which would otherwise be payable by suppliers of business services.
