I run a property management company — how do I account for rent I collect on behalf of landlords?

A property management company is usually acting as an agent for the landlord, not as the property's owner — so rent collected from tenants belongs to the landlord from start to finish, and shouldn't be booked as the company's own revenue at all. A common mistake is recording the full rent collected as revenue and then booking the management fee as a deduction or expense — this inflates the numbers in the financial statements and distorts the true picture of the company's actual activity. The correct treatment is to record only the management fee (and any other agreed charges) as the company's own revenue, with collected rent sitting in a separate client-funds liability account until it's passed on to the landlord.

Handling client money needs a clear separation — ideally a bank account entirely distinct from the company's operating account, with a clear ledger per property or landlord showing what was collected, what was deducted (fees, approved maintenance), and what was remitted. This isn't just good practice — it also protects you if a landlord or tenant later disputes the figures, and it keeps client funds well away from your company's own cash flow and taxable income.

The management fee itself is a service subject to the standard 5% VAT rate, regardless of whether the property is residential or commercial. The rent itself isn't part of your revenue and doesn't get taxed on your own return — that's the landlord's VAT position, not the management company's (residential rent is generally exempt, commercial rent is standard-rated, but either way it belongs to the landlord's side of things).

Costs you pay on the landlord's behalf — cleaning, maintenance, utility bills — need to be assessed case by case: if you're paying strictly as an agent, with the original invoice in the landlord's name and no markup, it can generally pass through without extra VAT; but if your company contracts in its own name or adds a markup, it becomes part of your own taxable service at 5%. RASEEKH helps property management companies set up a chart of accounts that separates client funds from company revenue from day one, and invoices its fees correctly rather than sorting it all out at year-end.