Are you a managing agent or landlord and confused by some of the terminology and requirements when it comes to commercial service charge accounting?

Welcome to our commercial service charge FAQs where we provide valuable insights into various aspects of service charges for commercial properties.

Do I need a Service Charge Audit?

Where a Lease made after 1980 specifically refers to an “audit” this should be carried out in accordance with ISA 800(UK) and performed by a registered auditor. Leases that refer to an “audit” and were made before 1980 may not have anticipated the work required by a modern auditing framework. An Independent Accountants Review Report in accordance with International Standard on Review Engagements (ISRE) 2400 (Revised) should be performed where an audit is construed as not being required.

Who can carry out an Independent Accountant’s report in accordance with ICAEW?

Given the knowledge and competence required by ISRE 2400 (Revised), it is likely that the reporting accountant will need to be a member of one of the member bodies as set out in Appendix 6 of TECH 09/14BL. The reporting accountant should be independent of the manager and should not be an employee, director, or associate of the owner or manager of the property or of any agent or associate of the owner or manager of the property.

What is meant by Accounting Policies when preparing service charge accounts?

The Service charge accounts should include a comprehensive list of accounting policies and principles on which the accounts are prepared including whether the accounts are prepared on an accruals basis or where permitted on a cash basis and whether the owner has waived the exemption to charge VAT (Option to Tax). Where the accounts are prepared on an accruals basis the year-end tenant information should include a schedule of closing prepayments and accruals

What should be included in a service charge tenant pack to comply with the RICS Professional Statement?

A service charge tenant pack should include:

  • A Statement of service charge expenditure
  • Introduction
  • The Management Team
  • Service charge expenditure report
  • Service charge certificate
  • Notes to the Expenditure Report
  • Operational review
  • Service charge apportionment schedule
  • General notes

How M+A Partners can help

An experienced service charge accounting team means you will receive professional advice on best practice when it comes to reviewing service charge accounts. Our guidance and services are aligned to the standards of management required in commercial property, including  RICS Service Charges in Commercial Property.

Should you require a service charge audit or independent service charge review of your commercial service charge accounts, please get in touch with me using the details below.

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