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HMRC internal manual

Trusts, Settlements and Estates Manual

Trusts for particular purposes: flat management companies - registered social landlords and other ‘exempt landlords’

Registered Social Landlords (RSLs) are, in England and Wales, independent, private sector, non-profit making bodies whose main purpose is to provide decent quality, affordable housing for people on low incomes. About three-quarters of them are charities.

Section 42 LTA 1987 does not apply to tenants of ‘exempt landlords’ (Section 42(1) LTA 1987). In accordance with Section 58(1)(g) LTA 1987 a RSL is an exempt landlord. There are other exempt landlords defined in Section 58(1) and (1A) LTA 1987 such as district councils and certain development corporations. See TSEM5745 where Section 58(1) and (1A) LTA 1987 is reproduced.

Whilst Section 42 LTA 1987 does not apply to RSLs and other exempt landlords, the terms under which sinking funds and/or service charge funds are held by exempt landlords may still create a trust. Typically the terms under which such funds are held will be part of the lease agreement. Any dispute over the existence of a trust or the type of trust brought about by the terms of a lease should be dealt with by the nominated deeds officer in the normal way (see TSEM2160).

See TSEM5750 for changes made to the taxation of service charge trusts from 2006-07.

See TSEM5710 for changes to the taxation of service charge trusts for 2007-08 onwards.