RTM Dormant Accounts Statement

[Tony P]

Can someone please direct me to a sample form/format/template for submitting to Companies House.
I can find a form for dormant companies limited by Shares but nothing appropriate for 'dormant' RTM Companies limited by Guarantee.

TIA

[leaseholdanswers]

Can someone please direct me to a sample form/format/template for submitting to Companies House.
I can find a form for dormant companies limited by Shares but nothing appropriate for 'dormant' RTM Companies limited by Guarantee.

While dormant accounts are widely used in fact sooner or later it will be exposed as the RTM incurs significant transactions for the expenses of the building. Filing as dormant in in that case a false declaration by the directors.

It is only the SC income that is ring fenced from the company.

As you have to produce a statement if income and expenditure under the lease and Section 21, you might as well have the accountant produce those inside the RTM accounts. If you are being charged more than £20 to £30, then find another accountant.

[Tony P]

While dormant accounts are widely used in fact sooner or later it will be exposed as the RTM incurs significant transactions for the expenses of the building. Filing as dormant in in that case a false declaration by the directors.

It is only the SC income that is ring fenced from the company.

As you have to produce a statement if income and expenditure under the lease and Section 21, you might as well have the accountant produce those inside the RTM accounts. If you are being charged more than £20 to £30, then find another accountant.

My interpretation/understanding is Service Charge transactions are not those of the RTM Company per-se. Monies received by the RTM are held 'in trust' for the Leasees and expended on their behalf. A Client Account.

Transactions within a Client Account are not those of the intermediary holding the account but of the Clients themselves - therefore outside transactions of the RTM itself and the RTM remains technically Dormant.

So, has anyone a format now acceptable to Companies House? They say the one we have used for the past few years is no longer acceptable.

[leaseholdanswers]

My interpretation/understanding is Service Charge transactions are not those of the RTM Company per-se. Monies received by the RTM are held 'in trust' for the Leasees and expended on their behalf. A Client Account.

I am sorry but that is entirely incorrect. It's a popular misconception.

The RTM has assumed the management functions of the landlord under CLRA 2002, it cannot therefore be it's own client and cannot hold a client account.

It incurs the costs of service provision itself, and as explained only the service charge income has to be held separately on trust under LTA 1987.

That expenses are paid out of that account is only a convenience.

To have a client, there needs to be two parties a principal and agent, there is only one, the RTM.

It is only where you have appointed say a managing agent that they hold those monies in trust and in a client account.

Besides every contract is enters into is a transaction, the dormant exemption only applies for insignificant ones such as the filing fee or CT return/

Deciding on filing dormant accounts depends on the directors making that decision and if for example it becomes insolvent and they have failed to report the transactions they risk prosecution.

If the accounting process were understood, than the alteration of the template you have is very simple. I can only conclude that it isn't, so I cannot expand on that without putting you at risk.

You should I hope now understand why the conclusion you have reached is incorrect- if your board understand that and assume the risk that is one thing.

My advice would be to incur the extra £20/£30, it is after all what I do, but if you want to persist in a template, a search of the CH website for Right to manage companies that record as dormant and download a copy and type it up.

[Gordon999]

Can someone please direct me to a sample form/format/template for submitting to Companies House.
I can find a form for dormant companies limited by Shares but nothing appropriate for 'dormant' RTM Companies limited by Guarantee.

TIA

I think you can declare the RTM as a "dormant company" in returns to Companies House since it only has the legal right to demand service charge payment from the leaseholders and does not engage in profit making activity.

The RTM company should either appoint an external managing agent or appoint the Residents Association ( for self-management ) and remain a dormant company.

The service charge guide issued by ARMA may help you :

http://www.arma.org.uk/doc/public/LA...-26-10-11-.pdf

You can search the records at Companies House for a dormant RTM company and buy/download a copy of its accounts ( for one pound by credit card ).

I may be wrong, but I would expect the dormant accounts to show on 2 founder shares and Nil turnover , and Nil income , minimum expenses ( for annual fee paid to CH and bookkeeping fee if any ).

[leaseholdanswers]

I think you can declare the RTM as a "dormant company" in returns to Companies House since it only has the legal right to demand service charge payment from the leaseholders and does not engage in profit making activity.
I may be wrong, but I would expect the dormant accounts to show on 2 founder shares and Nil turnover , and Nil income , minimum expenses ( for annual fee paid to CH and bookkeeping fee if any ).

I am sorry but we have been round thsi subject before.


The Act and Ch guidance is quote clear dormancy depends on transactions,and the ones you mention are ones that CH say can be excluded from being considered- as they are essential whether the company is dormant or trading.

Profit is not a deciding factor as the RTM as enshrined in law is a not for profit company.

Transactions include income and expenditure all of which they conduct, it is only that that the money received, even if they pay someone else to collect and hold it, is only ring fenced on trust.

I am not saying this to beat up on anyone but in the last 3 years I have been called on to rescue RTMs and a couple of RMC's and a major factor in deciding whether to call it a day and start over is that the failure declare the transactions that led to the losses could lead to prosecution and damages claims, where directors could face personal liability for that decision, from leaseholders and members who were unaware of the financial situation which they could otherwise establish.

Happily in two cases it is the firms of accountants and in one case thee MA who gave that advise who have paid up the shortfall.

Seriously you are doing the detailed I & E anyway all it needs is a directors report a four line ( summary) I & E and a balance sheet ( of which is 99% is already attached to the trialled I & E anyway) with the requisite statements and its done.

[Tipper]

Can I stretch this topic a bit further please?

Can you advise the tax situation and CH requirements for a nominee company formed solely to acquire the collective freehold by enfranchisement under the Leasehold Reform, Housing and Urban Development Act 1993?

Thanks

[Gordon999]

This link may help to explain the meaning of dormancy - it shows two different branches of government ( CH & HMRC) haven't got their acts together :

http://www.accountingweb.co.uk/artic...s-right/520788

[Gordon999]

Can I stretch this topic a bit further please?

Can you advise the tax situation and CH requirements for a nominee company formed solely to acquire the collective freehold by enfranchisement under the Leasehold Reform, Housing and Urban Development Act 1993?

Thanks

1. CH requires filing of annual returns by the company and here is a link to CH website -

http://www.companieshouse.gov.uk/about/gbhtml/gp2.shtml

2. HMRC will require annual tax return submitted by the company but if there is no annual ground rent collection due to 100% participation in the collective purchase and no profit recorded at year end, they may offer to waive this requirement to submit future returns after the first return has been submitted and assessed.

[thevaliant]

I am sorry but we have been round thsi subject before.[/I]

I actually completely agree with LHA (even though I have filed dormant accounts for my lessee owned freehold company previously).

The LL's expenditure is the LL's expenditure and should be accounted for as such. Therefore, it must be matched by income coming from a ringfenced account for service charges so, on that basis, the accounts should record the expenditure, equally offset by the income taken from the service charge account and (personally) should ALSO include in the balance sheet the monies held on trust, offset by an equivalent liability (recognising the fact it isn't the LL's money - yet).

Of course, the ICAEW have been all over the show with this in the last few years, first coming out around about 2008 in saying these sort of companies are fully dormant, then maybe not earlier this year.

Of course, far be it from me to suggest they go around the houses with conflicting advice and revise it back to what they originally said in the first place (*cough deferred tax in 1972 cough*).

[leaseholdanswers]

Perhaps because a few of us ( who, me? ) have been saying that you misunderstand the operation of the "on trust" money - it's the cash not the expenditure that operates "on trust".

Where there is an agent their contract may have an effect. The standard contracts floating around such as the RICS standard one, and for that matter the many variants are cast in the role as an agent, not a contractor who takes on the expenditure liability such as say the FM type contractors.

It's a popular misconception and accountants are not immune to it, that the managing agent is a main contractor, all the contracts and liability is theirs, as is the income, save for annual adjustment of the surplus or deficit, and the profit is their fee.

Cynically some say that dormancy helps the agents raise fees as they can charge for leaseholder sales pack rather than the smart buyer downloading it from CH for peanuts.

Even the CH advise doesn't tie in with others and that why I conclude that as you are doing I & E any way, it's neither hard nor costly to add on a page for a bog standard report and summary I & E.

[thevaliant]

Of course, I would point out that a set of statutory accounts, even full (which won't be the case with many smaller blocks) accounts are not helpful enough to have detail to them.

Download any set from CH. It's unlikely the block company will be medium and therefore any accountant worth their salt would've filed abbreviated and for that you get:

a. A balance sheet
b. Accounting policies
c. Debtors > 1 year (none really)
d. Secured creditors ONLY
e. Share capital (none if under guarantee)

The statutory accounts are rubbish even if expenditure and income is run within the RMC. Too hard to understand to the lay person and don't give a detailed analysis of the costs expended.

[leaseholdanswers]

Yes that's right they normally have a summary I & E gross income less gross expenses,no shares in this instance, and tax paid, and that's it. The detailed I & E need not be attached or included, so it is hit and miss to find it on CH.

That said it saves the duplication of a balance sheet and even the larger blocks still squeeze in as small blocks with exemption.

CH's weblink provide a statutory form for dormant for both share and guarantee.