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Thanks
I thought this was a really useful article. Concise and well written. Thanks. I have saved it for future reference.
Much Appreciated
Clear, concise, no waffle - much appreciated. My thanks to the author for his efforts and for bringing these differences to my attention.
Dormant companies holding freehold (so called flat management)
Great article!
Just one point: it is unlikely that a company holding the freehold will be dormant. This is because ownership of the freehold usually brings an income in the form of a ground rent. Even though the ground rent may be peppercorn, or in any case be very small, it is still income that should be recorded in an income statement. The reserves shown on the company's balance sheet may also change from year to year as a consequence.
Dormant Companies- A question
Thanks to the author!
A question:
my client got an Acknowlogement letter of dormant company from HMRC which he never told HMRC that the company is dormant( in fact the company is dormant), I can think of two possible reasons:
1, the company filed Annual Return to the Companies House which shows it's dormant, the information forwarded to HMRC.
2, the HMRC never heard from the company after sent out the CT41G,
but if the 2nd case the HMRC also can send pnalty notice if they not heard from the company after 24 months i.e. the normal tax return deadline.
does anyone knows why the HMRC send these Acknologement letter of Dormant company?
thanks
Associated for tax
Would a dormant holding company that received a dividend from its 100% owned sub, and crucially did not pay out this dividend out in full, be automatically considered an associate of the sub for CT purposes?
theory v reality @ Companies House
Many remark that Companies House remind them that their role is merely to have up to date information. Consequently, anyone who has incorrectly filed dormant (or any other) accounts in the past but where current correct accounts have been filed can leave things as they are.
This was demonstrated recently where I came across a company which had filed dormant accounts for it's first 3 years of existance. Six months later it filed amending accounts for the 3rd year, showing substantial trading activities and with comparative figures that indicated trading in year two. I subsequently came across a company cheque for £500 made out 2 month's after incorporation.
I am now on my third attempt to get Companies House to even query any of this with the company, including why the various statements required to appear on amending accounts are nowhere to be seen.
I have no doubt that HMRC will only have seen year 3 MKll
This is not an isolated incident and it does make me wonder why we bother to learn & practice all this stuff.
Associtaed for tax
@Matthew Pratt - the answer to your question is probably not but maybe! Have a read of CTM03590, 'Non-Trading Holding Companies' secton at the bottom of the page which refers to SP5/94 which is now enacted as CTAs2010 s25 and 26. In particular s26 is relevant to your question. [Shame the manual isn't yet updated.]
Freeholds
Actually I live in a block of flats where the company scenario is as Jennifer suggests. The flatowners are the shareholders, the Freehold is owned by a dormant company and there is no ground rent.The management fees go to a separate company.
Freehold and Dormant companies
I too live in a block of flats and am a shareholder in the freeholding company. Based on legal advice, we distinguish ground rents from service charge income. The former is recorded in the freeholding company's accounts (and hence it can not be a dormant company) because the company has absolute title to these amounts. The latter is not accounted for in the freeholding company's accounts and are held in trust for the benefit of the lessees so that the freeholding company has no absolute title. I am surprised to hear of a freehold for which no entitlement to ground rent exists.
Freehold and ground rents
It was my understanding that the ground rent (and other charges perhaps) derive from a lease not a freehold. So whilst the company may own the freehold or headlease (and the subleases to the flat owners) and if that's all it does, as Jennifer says, it can be regarded as dormant. The rent derived from the subleases must belong to another entity somehow though, maybe through a trust or subsidiary of the freehold owning company. Anyone got the legalities nailed?
Who owns the ground rents if the freeholder doesn't?
A freeholder who does not create leases (long or short) on a property will not derive an income from the property. Under those circumstances, a company owning a freehold may well be dormant. A freeholder that has created leases is active and is deriving income from the leases via ground rent. The service charges are (at least in theory) to defray the management, insurance and repair costs incurred by the freeholder.
Can a Dormant company sell shares?
A parent company was declared dormant by the accountant. However, during the time this company was dormant, shares were sold to several people for thousands of pounds. The money received for the shares was paid into the bank account of another company within the group and the parent company continued as dormant. When this matter was raised with the accountant, he said that the parent company was still dormant. Is this correct?
If a close company is to become dormant should it sell all of its fixed assets back to the directors.
Thanks
Freehold, Post cessation Expenses & Dormant Companies
I should be most obliged if someone can offer advice in respect of a company, which at the date of cessation had a freehold property on acres of land and a healthy bank balance. The directors have been unable to sell the property and expenses to maintain the property are incurred and paid from the company's bank account. The company has no other income against which expenses can be relieved. Furthermore directors paid personal expenses from the company's bank account. I informed the directors that as the company's reserves are being depleted and its bank account used to pay personal expenses, accounts will have to be prepared. The directors are husband and wife. His loan account is in credit but the wife's loan account after the expenses of the year is showing a substantial debit balance. The directors said that they spoke to a friend's accountant, who feels that I am trying to create work to generate fees especially when the company has ceased trading ( ceased July 2010).
Hi
Could you tell me why dormant subsidiaries cannot use form AA02? Is it because the controlling party must be identified in the accounts and the form AA02 has no field for this to be included.
Thanks
Hope this helps
My understanding is that controlling party disclosure is FRS etc and may therefore be omitted from abbreviated accounts
I'm putting it down to Companies Act SI2008/409 requirement to state name etc of company regarded by the directors as being the company’s
ultimate parent company
Quoting from Companies House:
"The AA02 form is not suitable for every dormant company, for example dormant subsidiary companies can not file a form AA02 as the form can not accommodate the specific details required to be submitted by dormant subsidiary companies."
Source:
Chapter 8 Section 6 of https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil...