Dormant company accounts for property management

[dotcomdude]

We are members of a 'Private company limited by guarantee without share capital', which owns the freehold of a seaside property.

A question has arisen over filing of the annual accounts. The company have previously been advised that they can file dormant accounts, as the company "isn't actually trading". However, it's not clear who gave this advice and I'm not sure it is correct.

The only transactions that go in and out of the company bank account in the year are:

• A monthly contribution from each member, calculated to roughly cover the whole expenses for the year (over the 12 months)
• Any expenses incurred by the company for repairs/maintenance of the building, cleaning, checks completed, company house filing fees etc

My understanding is that these are significant transactions, and therefore abbreviated/trading accounts should be compiled and submitted.

If I was on Who Wants to be a Millionaire, I wouldn't have said what I thought the answer was before asking the audience, but I don't suppose I've got any chance of winning a million here

What do you think?

 

[UK Contractor Accountant]

Have dealt with several of these lately -

The service charges receivable and property mgmt costs going through the company bank account are IMO on "Trust" only for the leaseholders which is why dormant company accounts are prepared for the freehold Ltd.

Separate Service Charge accounts would still need to prepared, however, for the tenants.

In any case check the leases to see what they say!

 

[UK Contractor Accountant]

1.2 Landlord company statutory accounts

1.2.1 Where the landlord is an rMc or rtMco or similar, service charge monies are subject to a statutory trust. Trust monies do not belong to the RMC/RTMCo and so should not be included as an asset in the statutory accounts of the RMC/RTMCo.

1.2.2 The treatment of transactions relating to service charges in the RMC’s/RTMCo’s statutory accounts and therefore by extension to the statutory accounts of investor landlords is subject to debate. It is not disputed that service charge monies are received on trust but the consequences of this in accounting for the transactions settled from such funds have yet to be clarified.

1.2.3 If service charge transactions are included in the statutory profit and loss/income and expenditure account of the RMC/RTMCo, the account should reflect the economic substance of the transactions. The account should be prepared in accordance with Schedule 1 to the applicable Accounts and Reports Regulations (SI 2008/409 for small companies and groups; SI 2008/410 for large and medium- sized companies and groups).

1.2.4 The question of whether service charge transactions should be included in the landlord company’s statutory profit and loss/income and expenditure account has been referred to the Urgent Issues Task Force. Separate guidance and examples for the treatment of service charge transactions in RMC/RTMCo statutory accounts will be issued when the underlying principles have been agreed

 

[dotcomdude]

Have dealt with several of these lately -

The service charges receivable and property mgmt costs going through the company bank account are IMO on "Trust" only for the leaseholders which is why dormant company accounts are prepared for the freehold Ltd.

Separate Service Charge accounts would still need to prepared, however, for the tenants.

In any case check the leases to see what they say!

Thanks!

I have a copy of the lease, as we are also leaseholders - and I hadn't thought to look in there - doh!

Reading the lease, it does make clear that any expenses to clean, maintain or repair the main structure of the building are the freeholder's (Ltd Co's) responsibility - and then at the end of each year the company should provide 'accounts prepared and audited by a competent Accountant' and set the service charge for the next year.

So, unless we all agreed to change the leases, I'm presuming that we need accounts anyway - and they might as well be filed each year, as it would be a fairly minor addition.

 

[UK Contractor Accountant]

So, unless we all agreed to change the leases, I'm presuming that we need accounts anyway - and they might as well be filed each year, as it would be a fairly minor addition.

yes if the lease says that include all in the accounts for the Ltd. Service charge accounts should so the surplus/deficit for the year with a debtor shown for the deficit if recoverable from the leaseholders.

 

[dotcomdude]

yes if the lease says that include all in the accounts for the Ltd. Service charge accounts should so the surplus/deficit for the year with a debtor shown for the deficit if recoverable from the leaseholders.

Thanks for your help!