Accounts for residents mgmt co

How to account for funds held to pay for maintenance works to common parts of a building

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I am the leaseholder of one of four flats in a house. We have a Right to Manage (RTM) company which we set up in order to manage the maintenance of common parts of the building ourselves, and I am a director of this company.

The company collects a bi-annual contribution of funds from the flats, which are held in a joint account to pay expenses that my co-director and I have access to and all four flats pay into then the maintenance services are paid out of that account. It isn't used for anything else. The biggest expense is the annual buildings insurance, and smaller expenses include fire alarm testing and so on. It is a company limited by guarantee, so there are no shares or shareholders. It is also a dormant company, since it is not a business and does not make a profit - any unspent funds are simply carried over to the following year.

First, I would like to check whether it is indeed a dormant company, as there are transactions happening - the collection of funds from each flat, and payment of the buildings insurance, fire alarm testing and so on.

Second, I need to submit accounts for the company and wonder if the balance of the funds held in reserve for works needs to be reported and how. I can see a field for 'cash at bank in hand', but this sounds to me like the profit that a business would make, which is not the case here, so I wonder if that should be left as zero, and the sum should go in the box labelled 'reserves' instead. It confuses me as the line above asks me to put shares in, however it being a company limited by guarantee, there should not be any shareholders. Unless this is a way of accounting for the fact that if it were to be closed then each of the flats would get their share of the reserve funds back?

Our accounts are really quite simple and I believe it should be possible to submit them ourselves, however the Companies House helpline said that they could not help clarify on the two points above - which is most unhelpful!

Any pointers gratefully received. Thank you.

 

 

Replies (21)

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By Hugo Fair
22nd Jul 2023 16:22

"Our accounts are really quite simple and I believe it should be possible to submit them ourselves" ... I'm sure they are IF you know what you're doing (like so much in life).

The reason for appointing a professional is they'll be able to tell you about anything other than your 2 questions of which you also need to be aware.

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RLI
By lionofludesch
22nd Jul 2023 16:42

"Our accounts are really quite simple and I believe it should be possible to submit them ourselves, however the Companies House helpline said that they could not help clarify on the two points above - which is most unhelpful!"

Mmmmm - it doesn't sound like you're able to submit them yourselves. It sounds like you're wildly underestimating the skills and knowledge you need.

Companies House is just a place to file stuff. Asking them for advice is as helpful as asking a filing cabinet. They don't have technical knowledge.

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By David Ex
22nd Jul 2023 19:36

I’m feeling generous:

https://www.google.co.uk/search?q=residents+management+company+accounts+...

Have a read before taking the wise advice, others have given, to appoint an accountant. If you keep half decent records, it won’t be costly and you won’t be losing sleep at night wondering if you’re complying with your obligations as a director.

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Replying to David Ex:
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By Tax Dragon
23rd Jul 2023 06:46

I think your link adds to the apparent confusion OP refers to below by asking about a different situation.

(Garbage in, garbage out is guaranteed, even with google - incidentally no amount of AI will ever change that. But it is also possible to bake a garbage cake from good ingredients.)

Links that I suspect are more relevant: https://www.gov.uk/right-to-manage-a-guide-for-landlords; https://www.lease-advice.org/advice-guide/right-manage/

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By Whistlejacket
22nd Jul 2023 20:14

Thank you to those who have replied. I certainly think that it is worth putting the question out there to start with when unsure. From reading online it would seems there is much confusion, even amongst professionals themselves and so I would tend to come to the same conclusion as yourselves!

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Replying to Whistlejacket:
Stepurhan
By stepurhan
22nd Jul 2023 23:12

It never ceases to amaze me how often non-accountant querists find "much confusion" online amongst professionals when asking a technical question. Are you able to link to where you read this "much confusion"?

But, assuming for the moment that said confusion is real and not just made up to try to justify not paying a professional to answer this query, how does asking here make sense? You have no accounting knowledge and have been able to join. That being the case, are you not likely to encounter even more confusion here?

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By 356B
22nd Jul 2023 20:18

I opened a deposit account with United Trust Bank for the Sinking Fund. No problems.

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Replying to 356B:
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By Hugo Fair
22nd Jul 2023 21:07

Think you may have intended to post this to a different thread ... https://www.accountingweb.co.uk/any-answers/residents-mgmt-company-clien... ?

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By paulwakefield1
23rd Jul 2023 08:25

One question that I don't think has been addressed is: The company is not dormant.

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Replying to paulwakefield1:
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By I'msorryIhaven'taclue
23rd Jul 2023 09:10

Ahha, they see the £150 charge for dormant accounts and decide that's for them.

And just because your company is non-trading, OP, don't make the mistake of thinking it's only five minutes work. (That's a phrase I'm hearing more and more lately! I'm currently working on a non-trading company set of accounts which nevertheless has a few thousand pounds of sales, stock, expenses, BBL, overdrawn DLA. Yeah, yeah, I know... only five minutes work).

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Replying to I'msorryIhaven'taclue:
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By Hugo Fair
23rd Jul 2023 11:45

A 5-minute job is one where you stop working on it after 5-minutes (irrespective of where you've got to).

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Replying to Hugo Fair:
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By Open all hours
24th Jul 2023 06:18

The 5 minute job is often the one where our combined 83 years experience comes in handy.

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Replying to paulwakefield1:
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By Hugo Fair
23rd Jul 2023 11:53

"The company is not dormant" ...

From CH or HMRC perspective?
https://www.gov.uk/dormant-company/dormant-for-corporation-tax
and
https://www.gov.uk/set-up-property-management-company (Tax for the limited company)

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Replying to Hugo Fair:
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By paulwakefield1
23rd Jul 2023 12:52

My apologies. I thought it was obvious that I was talking about it from an accounts perspective.

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Replying to paulwakefield1:
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By Tax Dragon
23rd Jul 2023 13:01

From the context, I thought it was obvious too.

But, to be Fair, all kinds of waifs and strays read these pages, and to some such it would be. Obvious, that is.

One thing that does puzzle me is the joint bank account. Joint with whom?

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Replying to Tax Dragon:
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By Hugo Fair
23rd Jul 2023 14:15

Good point (not the pun on my name but re bank account).

Sounds like joint account in names of OP+ co-director?
Hopefully actually meant joint signatory, not joint ownership.

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Replying to Hugo Fair:
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By Tax Dragon
23rd Jul 2023 16:10

Looks like I left out an "n't".

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Replying to paulwakefield1:
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By Hugo Fair
23rd Jul 2023 14:10

Indeed it was (to those who understand that there's a difference - which hopefully includes most readers, but not potentially OP or other unrepresented viewers).
So not directed *at* you, merely picking up on your point within a thread.

Not sure, even after all this time, that I've got the hang of delineating between expanding on / responding to / repudiating / etc :=)

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By ireallyshouldknowthisbut
24th Jul 2023 09:07

You would need someone to look at it in detail to be sure "which bits are where?" but the simplest way to set this up, is to have the company hold the freehold only, and prepare freehold accounts. This will not be dormant because it owns the freehold, and usually collects ground rent even if nominal, but might if you do 'em right have very limited transactions.

And the service charge accounts to be managed outside of the limited co, which for 4 flats can be on one side of A4 and probably prepared on more or less a "cash BF, list of expenses, list of payments from the flats, Cash CF" basis.

This critcal bit however will be "how is this setup?" The normal answer is 'badly by people who didn't know what they were doing, or trying to make money on the fees but making it more complex than it needs to be"

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By Mr_awol
24th Jul 2023 12:04

Whistlejacket wrote:

Any pointers gratefully received. Thank you.

1) Consider whether the company is, or isnt, dormant (may need to look at leases, banking arrangements, and all sorts of other stuff)
2) Consider what needs to be reported and by whom (somewhat related to the above)
3) Consider how to account for the surplus - I have seen reserves accounted for as income in advance, which might have negative consequences in some circumstances.
4) Your accounts probably are easy to someone who already knows 1-3 (and loads of other stuff too) but probably arent for you - I'd suggest paying someone to do it for you, and reckon you should be able to get it done for less than £500 if the whole thing is fairly small.
5) There really isnt that much 'confusion amongst professionals' these days - although there used to be some, due to odd techy points. Neither is it very very hard. It's just quirky and the requirements can differ depending on the specific circumstances.

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By Leywood
24th Jul 2023 14:59

[quote=Whistlejacket]

Our accounts are really quite simple and I believe it should be possible to submit them ourselves, .

So simple that you need to come on to an Accountancy forum and ask Accountants for help, for free!

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