Filing dormant accounts for RTM

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    #16
    This thread is about filing "dormant company accounts" at Companies House for the RTM .

    Dormant company account is filed at Companies House by a "non-trading" company with no transactions to report except for payment of its own annual filing fee. The status of "dormancy" is granted to companies on a yearly basis by Companies House.

    The "dormant company account" belongs to the RTM company and subject to filing at Companies House.

    It is NOT the same account as the " annual service charge account" which reports on spending of service charge money to the leaseholders, under the L& T Act 1985 and amended by ICAEW.

    Comment


      #17
      Except in a year when there are no payments in or out at all, an RTM has transactions to report. Even if it has no bank account and all payments go through an agent, they are transactions made on behalf of the company and over which the company has or ought to have control. The transactions are the company's transactions. Accordingly under the Companies Acts for the purpose of the Companies Acts RTMs cannot be dormant companies. See sections 386 and 1169.

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        #18
        If the experts cannot agree, I doubt that we shall reach agreement.

        The accountancy professional would argue that the company is keeping proper books of account if it keeps separate records of the service charges and deals with them separately to the company's own books of account. It would also argue that the transactions relate to the service charges and not to the company therefore the company is entitled to consider itself dormant,

        I recall having lengthy discussions on the subject with an accountant some years ago and needless to say, we could not reach agreement.

        Comment


          #19
          Thanks all - had a look and there's just zeros in the boxes from all previous years so that's what I've put in too! Hope that'll be ok.

          Comment


            #20
            RTMs and RMCs can and should be dormant but often are not which is incorrect. The payments mentioned above come from service charge funds which are outside the company and belong to the leaseholders. The only income that a company would have is ground rent. There is a directive which permits certain company charges to be paid from service charge funds if there is no ground rent. The difficulty comes if a company has ever submitted accounts as not dormant as you cannot change back.

            Comment


              #21
              .gov website defines a dormant company.

              ‘Your company is called dormant by Companies House if it’s had no ‘significant’ transactions in the financial year.
              Significant transactions don’t include:
              • filing fees paid to Companies House
              • penalties for late filing of accounts
              • money paid for shares when the company was incorporated’
              (https://www.gov.uk/dormant-company/d...ompanies-house
              ACCESSED 11 JUNE 19)

              Most RTM companies will have transactions that are not Service Charges and do not fit the definition of ‘no significant transaction’. For a transaction not to be significant it is a transaction that does not need to be entered in its accounting records.

              RTMs (where ground rents are not nil) will also collect ground rent which is income that needs to be accounted for. All income, even if it does not give rise to CT, must be recorded in accounting records.


              Comment


                #22
                Originally posted by Sarah B View Post
                RTMs and RMCs can and should be dormant but often are not which is incorrect. The difficulty comes if a company has ever submitted accounts as not dormant as you cannot change back.
                Do you have a source for the first paragraph of your statement?

                Secondly our RMC experienced no problems moving from filing total exemption full accounts to the filing of dormant accounts. All it took was a change of managing agent to an ARMA/RICS regulated agent!


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                  #23
                  RTMs have no right to ground rents; those go to the freeholder.

                  Comment


                    #24
                    Originally posted by Sarah B View Post
                    The only income that a company would have is ground rent. There is a directive which permits certain company charges to be paid from service charge funds if there is no ground rent. The difficulty comes if a company has ever submitted accounts as not dormant as you cannot change back.
                    An RMC often has other income eg interest and administration charges. Many RMCs changed from reporting full accounts to filing dormant accounts after Tech 03/11 was issued.

                    Comment


                      #25
                      Ah yes, of course RTM's do not collect ground rents (silly me).

                      Comment


                        #26
                        Originally posted by eagle2 View Post

                        An RMC often has other income eg interest and administration charges. Many RMCs changed from reporting full accounts to filing dormant accounts after Tech 03/11 was issued.
                        You are correct, I was just trying to keep it simple. Those items can also be applied to service charges if the accounts are dormant - see the ARMA guidance note (it is not totally clear cut I know)

                        Comment


                          #27
                          Originally posted by josepha333 View Post

                          Do you have a source for the first paragraph of your statement?

                          Secondly our RMC experienced no problems moving from filing total exemption full accounts to the filing of dormant accounts. All it took was a change of managing agent to an ARMA/RICS regulated agent!

                          Well I did, but thank you, it seems the wording has changed so that a company can become dormant. That is useful to know, I will have to log in to my own account though as I thought the questions asked when I filed suggested that you can't

                          Comment


                            #28
                            The status of a Company can always change, a Company can genuinely cease to trade and become dormant or a Company which was dormant can commence trading.

                            In the case of RMCs nothing has changed, so all those Companies which have switched from filing full accounts to filing dormant accounts appear to be admitting that their accounts were defective in the past. Alternatively the accounts are defective now,

                            Comment


                              #29
                              Professional opinion is clearly divided. In the absence of clarification from the courts all we have to go on is the Companies Act 2006. The following are the relevant sections omitting anything not relevant to RMCs and RMTs:

                              1169 Dormant companies

                              (1) For the purposes of the Companies Acts a company is “dormant” during any period in which it has no significant accounting transaction.

                              (2) A “significant accounting transaction” means a transaction that is required by section 386 to be entered in the company's accounting records.

                              (3) In determining whether or when a company is dormant, there shall be disregarded—

                              (a) any transaction arising from the taking of shares in the company by a subscriber to the memorandum as a result of an undertaking of his in connection with the formation of the company;

                              (b) any transaction consisting of the payment of—

                              (i) a fee to the registrar on a change of the company's name,

                              (ii) a fee to the registrar on the re-registration of the company,

                              (iii) a penalty under section 453 (penalty for failure to file accounts), or

                              (iv) a fee to the registrar for the registration of [F1a confirmation statement].

                              (4) N/A

                              386 Duty to keep accounting records

                              (1) Every company must keep adequate accounting records.

                              (2) Adequate accounting records means records that are sufficient—

                              (a) to show and explain the company's transactions,

                              (b) to disclose with reasonable accuracy, at any time, the financial position of the company at that time, and

                              (c) to enable the directors to ensure that any accounts required to be prepared comply with the requirements of this Act (and, where applicable, of Article 4 of the IAS Regulation).

                              (3) Accounting records must, in particular, contain—

                              (a) entries from day to day of all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place, and

                              (b) N/A

                              (4) N/A

                              (5) N/A

                              Service charge contributions and expenditure are clearly not covered by section 1169(3). That leaves section 1169(2) for which we have to refer to section 386 the key part of which is subsection (2)(a) as clarified by subsection 3(a). The question to ask in respect of an RMC or RMT company is if service charge contributions and expenditure are "sums of money received and expended by the company". I think they have to be even if the transactions are handled by an agent without any funds going into or coming out of the company's bank account. Even if they are not, the clincher will be the agent's fees - they have to be money expended by the company.

                              It is not surprising if some companies have changed their registered status without any problem. There are getting on for two million companies in the UK and however many staff there are at Companies House there is no way everything can be checked.

                              Comment


                                #30
                                Originally posted by Lawcruncher View Post
                                .

                                It is not surprising if some companies have changed their registered status without any problem. There are getting on for two million companies in the UK and however many staff there are at Companies House there is no way everything can be checked.
                                You are correct, Companies House will accept accounts which have been signed by a director. It would be interesting to know the outcome if a shareholder took a director to court on the grounds that he had filed false accounts.

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