Hi!
We want to complete our company accounts for the period of 1st Oct 2012 to 30th Sept 2013, but we are unsure as to which type of accounts we should select from Companies House. There are 5 option on their webs site, but I am sure it can only be either Abreviated Accounts or Dormant Company Accounts.
Our company was created with the sole purpose of acquiring the freehold from the Council. This company does not generate any kind of revenue. All we do is collect the service charge required to buy the building insurance for the block, which is made up of four flats, on a yearly basis. This sum does not rise above the £1000.00 per year divided by the four owners of the flats. Sometimes, there will be occasions, as with this period, where we will be required to contribute more to these service charges, in order to make repairs to the block.
Three of the flat owners were given one share each with the value of £1, and the certificate of the company says it is limited by shares, and I guess it has never traded. The fourth flat belongs to the Council and now we are their Landlord.
We received a letter from the HMRC 2 years ago telling us that based on the information we provided we didnt't need to fill in another company tax return our for another 5 years. But I was told, the HMRC and the Companies House are 2 different things.
Based on the information above, can anyone please advise as to what type of account we should be completing from Companies House?
I will aprecciate any comments/help on this subject.
Thank you
Related resources
Replies (27)
Please login or register to join the discussion.
Not dormant
Dormant would only be if the company was doing nothing. You are collecting money and paying it out.
HMRC and Companies House are two different things.
HMRC are only interested if the company has taxable income. In fact, you can have a small amount of taxable income (interest on money in the company bank account for example) without them wanting anything.
Companies House require reporting every year, simply because you are a company. As well as the accounts, you will need to submit an Annual Return.
Thank you stepurhan for your
Thank you stepurhan for your response.
That was my understanding of Dormant but I was being led by conditions of when to use this type of accounts, limited by Shares and that have never traded.
So, do you think the abreviated accounts is the way to go?
companies house guidance
Below is a link to Companies house guidance on reporting for a company. It has lots of useful information on the different types of accounts. Once you have read it you should be able to determine what format best fits the company's requirements.
No need to incorporate the service charge transactions
Unless contradicted by the terms of your leases, from what you say, the monies collected & spent out in insurance or other costs are held under statutory trust (S42 LTA 1987) and so would not fall to be reported in the company's own accounts (there is still debate about this in the profession but, for this case it would be daft to bring in the numbers if you don't have to).
If all the company did was issue share capital in the year, or if that was done in a previous year, and ignoring the service charge transactions, I would do dormant accounts.
If however there was any other financial transaction then I'd go with J&H's link to the micro-company accounts which take care of everything in one go and mean you only have to prepare one set of accounts. If instead you decided to do abbreviated accounts for companies house, you would also be required to prepare full, pre micro, accounts for the shareholders, a waste of time in this case.
In case you need it, for more info on micro accounts see here
A little bit more info
Thank Paul for your e-mail.
I just want to say that you are correct. The only activity this company sees is the collection of money to cover the service charge for the building insurance and repairs to the block.
We were given a share, each of the directors of the company, with the value of £1 but we don't know what to do with it. We have not issued any share capital as you suggested. Can we still do the dormants account do you think?
Regards,
Arturo Maldonado
Acting as agents?
I am assuming that you are thinking that the company is simply acting as an agent in transferring money, so no transactions for the company itself. It merely acts as a conduit for the cash.
I cannot help thinking that the insurance is going to be in the name of the company, not that of the individual tenants. The same is likely to be true of any building work undertaken. If these transactions are in the name of the company, then surely they are company transactions for the purposes of determining dormancy. The company raises service charge bills, and the company pays bills in its name. I'm not sure that the statutory trust is enough to negate that.
But abbreviated accounts won't show the costs in and out anyway. They should just show the money in the bank, and a matching creditor for money to be paid out. It might be better to submit them anyway rather than risk having someone objecting to dormant accounts being filed.
As an aside, do the residents not like to have a set of accounts that shows where the money they have paid in has been spent anyway?
FRED 50
I am assuming that you are thinking that the company is simply acting as an agent in transferring money, so no transactions for the company itself. It merely acts as a conduit for the cash.
I cannot help thinking that the insurance is going to be in the name of the company, not that of the individual tenants. The same is likely to be true of any building work undertaken. If these transactions are in the name of the company, then surely they are company transactions for the purposes of determining dormancy. The company raises service charge bills, and the company pays bills in its name. I'm not sure that the statutory trust is enough to negate that.
But abbreviated accounts won't show the costs in and out anyway. They should just show the money in the bank, and a matching creditor for money to be paid out. It might be better to submit them anyway rather than risk having someone objecting to dormant accounts being filed.
As an aside, do the residents not like to have a set of accounts that shows where the money they have paid in has been spent anyway?
What happened to FRED 50 in the end? I know that UITF 49 was withdrawn (well done the ICAEW on that one!) but the FRED 50 consultation closed last year and nothing seems to have come of it yet.
Thank you stepurhan for your comments.
Your assumptions are correct.
The company is only a conductor of cash. The company raises and issues a service charge bill to the Council mainly to cover the cost of the building insurance for the block, which is in the name of the company. The only other monies we collect are to pay the cost of keeping the bank account running, which is £7.50 per month, which we also consider it part of the service charge because the Council needs it to make their deposits there.
I am preparing the full accounts, which are made up of just 3 or 4 transactions all to do with service charge, in order to submit it together with the online dormant account report, like you suggested.
Now that you asked, I think we have to start issuing a set of accounts to the Council to show them how their service charge is being spent.
Thank you very much for your help..
Regards,
Arturo Maldonado
Payments to companies House
Hi Paul,
I forgot to say that we also pay the online fee for filling in the annual return and the company accounts, those are the only transactions that are not service charge but amounts to no more than £25 for the two every year. Can we still do the dormants account?
Thank you in advance.
Arturo Maldonado
From what you have said the company is very much not dormant. You should also note that service charge accounts are not the same as company accounts.
I know you are not an accountant, but you should probably look at the document from the Financial Reporting Council that explains some of the issues with preparing residential management company accounts: http://www.frc.org.uk/Our-Work/Publications/Accounting-and-Reporting-Pol...
A question
Thank you for the link.
Our company is not a profit making company, and we have the bank account to prove it. The only financial activity of the company is the collection of service charges and repairs covered by these service charges. ah! and the online fee of Companies House for filling the forms online.
Doesn't that make our company dormant?
Regards,
Arturo Maldonado
Not dormant
Thank you for the link.
Our company is not a profit making company, and we have the bank account to prove it. The only financial activity of the company is the collection of service charges and repairs covered by these service charges. ah! and the online fee of Companies House for filling the forms online.
Doesn't that make our company dormant?
Regards,
Arturo Maldonado
No. Making a profit or not is nothing to do with being dormant, the definition of which is set out in the Companies Act: http://www.legislation.gov.uk/ukpga/2006/46/section/1169
The fact that repairs and insurance have been paid for is enough to make the company not dormant.
I think it might be an idea for you to consult an accountant. Doing residential management company accounts is relatively simple and it should not cost very much. They may also be able to find a cheaper bank account!
Way forward
Because transactions have taken place then "Abbreviated Accounts" are required by Companies House. A very easy matter to deal with using the online .pdf template - so just do it online at Companies House.
No need to consult an accountant for this extremely easy task provided that an accurate Balance Sheet can be drawn up and you have online filing (the necessary code / password) set up at Companies House for the company.
So lacking in detail these days
There's so little detail required in Abbreviated Accounts these days that it's just as easy to file Abbreviated as Dormant. If in doubt, go for Abbreviated every time.
Since you're required by law to prepare full (or micro) accounts for the members, then the simplest option is not to even consider abbreviated accounts - why prepare two sets of accounts when one will suffice? You are definitely NOT dormant. But you do need to check that link above to the recent publications about variable residential management fees. Your bank account almost certainly should be a trust account, and if it earns any interest, a trust tax return will be necessary.
I will read the docs sent
Thank you all for your help.
I have enough material to ask the right questions now.
Soemone suggested to employ an accountant to do this, but can any high street accountant be able to do this for us? or does it have to be someone with exopertise in the property area?
By the way, is there a template recognised by Companies House taht I could use for the full accounts?
Thank you in advance.
Arturo Maldonado
UITF 50
Some one asked about FRED 50. It appears to have been kicked into the long grass and I understand the current idea is that there will be a paragraph in FRS 102, eventually.
Right Said FRED
Some one asked about FRED 50. It appears to have been kicked into the long grass and I understand the current idea is that there will be a paragraph in FRS 102, eventually.
Thanks Kris. Not a wonderful outcome - this is the sort of UK-specific area that I think the FRC can add some definite value in.
Hello again, had to chuckle at the suggestion to get the help of an accountant and that most decent High St ones should be able to help. The preparation of service charge accounts AND the preparation of RMC company accounts has been a mess for over 20 years due, to a great extent, to accountants (even decent High Street ones) not having bothered to research the relevant property legislation (ie Landlord & Tenant Acts) and resorting to that old trick; "if we/they did it like this last year, it must be right".
If this was all so simple why are the accounting rules so up in the air still and FRED 50 still in limbo?
As far as I am concerned the guidance issued in 2011 is the best starting point and, in a case like, this I'd not waste my time debating the pros & cons of reflecting the property transactions in the P&L, then fiddling the balance sheet so that the bank balance doesn't appear, I'd just do dormant accounts.
I think that is the last thing that should be done - in that case the financial statements would clearly not be in compliance with the Companies Act (as there is no way the entity is dormant). I would prefer to do the I&E properly, and rather than 'fiddling' the balance sheet include the cash held on trust as an asset, with appropriate disclosure. There are a number of other circumstances in which money held on trust is classified as an asset, and 'taken as a whole' (including the disclosure) I don't see how such financial statements would not present a true and fair view.
Still think it's dormant
Hello again, had to chuckle at the suggestion to get the help of an accountant and that most decent High St ones should be able to help. The preparation of service charge accounts AND the preparation of RMC company accounts has been a mess for over 20 years due, to a great extent, to accountants (even decent High Street ones) not having bothered to research the relevant property legislation (ie Landlord & Tenant Acts) and resorting to that old trick; "if we/they did it like this last year, it must be right".
If this was all so simple why are the accounting rules so up in the air still and FRED 50 still in limbo?
As far as I am concerned the guidance issued in 2011 is the best starting point and, in a case like, this I'd not waste my time debating the pros & cons of reflecting the property transactions in the P&L, then fiddling the balance sheet so that the bank balance doesn't appear, I'd just do dormant accounts.
I agree that the accounting requirements in this area haves been a mess for quite a while, but surely if the company contracts under its own name to purchase the insurance and any necessary repairs, then that is a transaction that has to be recorded in its books under s.386. Therefore it cannot, by definition, be a dormant company. However, I do recognise (as does FRED 50!) that some people have been, and still are, filing dormant accounts in this situation. But the argument for that doesn't hold water for me. Non-trading, maybe, but dormant - no.
Substance over form
Personally, I thought the idea that the tenants' money was held in trust made perfect sense.
The reality was that that was what was happening. It's how everyone perceived it - including HMRC.
That's right.
Personally, I thought the idea that the tenants' money was held in trust made perfect sense.
The reality was that that was what was happening. It's how everyone perceived it - including HMRC.
So far as I understand it that is perfectly correct- the money is held on trust. What is happening though is that it the RMC is entering into contracts as principal, not as agent (trustee). It is then using the money held on trust to pay for those contracts (insurance, repairs, etc). Because it is entering into those contracts as principal it has accounting transactions to enter on the Income & Expenditure side and is therefore not dormant.
ordinary shares of £1 in a residential management company
Hi!
Thank you all very much for your comments. I finally, found the holy grail. I had already the income/expenditure accounts of the company and with that information, and by reading all your comments and recommended reading, I managed to fill the company balance sheet in companies House. However, there is one thing that I don't know what to do with.
When we created the company we were given one share with the value of £1 each one of us (3). Now, my question is, what type of asset are these shares? or where should I include it in the balance sheet. Is it a Fixed Asset? a Current Asset? or a Capital and Reserve? I am not too clear why and how a share is needed? I appreciate your help on this.
Back to front
You are mixing up the company and its shareholders.
Shares are not an asset of the company. They are assets of the shareholders who own them.
In the company's balance sheet the shares go in Capital and Reserves.
If you do not understand why the company needs to have a share capital you should perhaps read up on what a "company limited by shares" is. That is basic company law that anyone involved with a company should be aware of.
Thank John, I will do that but for now I just want to get the annual accounts in companies house out of the way because it is due in June.
We formed the company, with the aid of a solicitor, in order to acquire the freehold of our flats because the Council was holding us at ransom whenever they pleased or needed money. We are not accountants nor business men but I have learnt a lot through the comments on this site, and will definitely spend time investigating what a company limited by shares is as you suggested.
In the meantime, If I declare the 3 shares we, the shareholders have, in the Capital and Reserves section of the company's balance sheet is Other Reserves the place to put them? or would you put them in the Called Up share capital or Share Premium?
Thank you very much in advance.