Correct Accounting report for an RMC

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Correct Accounting report for an RMC

    I am wondering what is the correct accounting report for an RMC, that is owned by the leaseholders / freeholders and also owns the freehold.
    Has the Tec/03/11 been superseded? Is the Financial reporting standard 102 section 1A appropriate?
    Is it correct to report that the reserve fund is owned by the shareholders? The shareholders and the leaseholders / freeholders may be the same people but the residents as shareholders don't contribute any money at all. If the money belongs to the shareholders, then the reserve fund is not ring fenced according to S42??? If one reads the accounts, it is as if the reserve fund is an asset of the company.
    If the surplus from the annual service budget is moved to the members reserves, isn't this a 'profit' to the company? It is reported as 'other comprehensive income'.

    I am so sorry for this 'rain of questions' ... if you don't have answers, could you please guide me to the right direction?
    Thank you so much!








    #2
    If the reserve fund is established by the lease, it is held on trust, in the same way as the rest of the service charges, and therefore is not owned by the shareholders. In this situation, the shareholders own the company. The company is is the legal owner of the funds, but is not the beneficial owner, so they appear on the service charge accounts, not the company accounts.

    Details can vary, but in general the leaseholders have no rights to the money, but it may be spent on some of the things for which they pay service charges, for their benefit. Any tie to a specific flat is to that flat, not the current owner.

    ICAEW TECH 03/11 is the current accounting standard, but, as the document itself says, is subject to the wording in the lease, which may make different requirements.

    The only tax on a correctly operated reserve fund, under the lease, is on investment returns. It is taxed as a discretionary trust, and, hence or otherwise, there is currently a minimum savings income below which no tax was payable. Immediately before that small amounts of income where taxed at the same rate as basic rate, and a net bank account would have required no further tax bureaucracy.

    (Even without the trust, the money wouldn't belong to the shareholders, but rather to the company.)

    If excesses are being swept into the reserve fund, it is almost certainly established by the lease, but it should be possible to get even voluntary funds, outside the lease, classed as tax exempt, as long as the company is never allowed to return the money to the shareholders.

    Comment


      #3
      Thank you Leaseholder 64. I

      Comment


        #4
        The RMC has to file its own "RMC company accounts" to Companies House and if it has no ground rent income, it will be filing dormant accounts.

        The RMC has responsibility under the lease to collect the service charge money from leaseholders and arrange maintenance of the building by appointing a managing agent who , if a RICS member , is required to provide management service complying to the standard in RICS Residential Management Code Version. 3 .

        Some managing agents are members of ARMA which has its own management code :

        https://arma.org.uk/downloader/dx6/2...harges_V01.pdf

        Comment


          #5
          The unspent service charge money including "reserve fund/sinking fund " belongs to the leaseholders. The RMC has to keep the service charge money in separate bank accounts called "client account" for which the bank will issue a letter to acknowledge the "client account" holds money on trust , belonging to the leaseholders. These accounts are ring fenced to guard against loss to creditors if the RMC is made bankrupt for any reason.

          Comment

          Latest Activity

          Collapse

          Working...
          X