RTM Company - HMRC Question

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    RTM Company - HMRC Question

    Hi,

    I am a director of a RTM Company for a block of three flats and I can slightly concerned about the situation with regards to HMRC.

    There was a significant gap between the company being formed and it becoming active. HMRC wrote to us and asked us to complete a form within three months of the company becoming active, which I duly did.

    However, I haven't heard from them since. I DID receive far more correspondence from Companies House, who requested a simple set of accounts, and are in fairly regular contact with us, but nothing from HMRC.

    I just phoned HMRC and they said that the company was 'dormant' according to their records. I explained the situation to the man I spoke to and asked him whether this was classed as 'dormant', and he said he didn't know, but to put the situation in writing.

    The company is 'limited by guarantee' (£1 per person) and does not make a profit. There is rarely more than £100 in the account. My questions are:

    1. Will HMRC want to receive accounts from us?
    2. Are we a 'dormant' company?
    3. Are they going to fine us for not informing them we became 'active' sooner (even though we did)?

    Thanks in advance for your help.

    #2
    Your best bet is to simply tell HMRC exactly how it is.

    A dormant company would not normally hold a trading bank account. Quite often HMRC will classify you as trading the moment you put money into a bank account, as you are capitalising a Company and you are earning interest, albeit negligible, or incurring business banking charges.

    1) If you are producing accounts to keep Companies House happy, then you should also produce a Tax Return
    2) The fact that the company does not make a profit does not negate your tax filing obligations. You need to be submitting a Tax Return showing the loss.
    3) Don't know, but the sooner you set the record straight the better. I just had a client have a £2,500 penalty revoked when they fully explained the genuine mistakes they had made...
    I can take no responsibility for the use of any free comments given, any actions taken are the sole decision of the individual in question after consideration of my free comments.

    That also means I cannot share in any profits from any decisions made!

    Comment


      #3
      I agree that you should write to HMRC explaining the circumstances. Based on my experience of this a few years ago they wrote back saying they would class the Company as dormant for tax purposes and wouldn't ask for a Corporation tax return for (five years from memory) but pointed out the need to tell them if anything materially changed. This seems to be borne out by this extract from the HMRC website:

      When HMRC will treat clubs and companies as dormant

      HMRC may also deem your club, society or company dormant for Corporation Tax purposes if it's active but meets specific criteria such as:
      • if your club or society has Corporation Tax due to be paid of £100 or less (known to HMRC as a 'small' club)
      • if your company is a flat management company that has been set up to manage a block of flats, which has no income other than interest income under £1,000 that's taxed at source
      If HMRC is aware that your company or organisation meets these criteria, they will write to you proposing to make your company or organisation dormant. This is known to HMRC as a 'concessional exemption'.


      I take the reference to income to mean taxable income - so not service charges received from flat owners.

      Comment


        #4
        Just realised this is an RTM (Right to Manage) Company...

        My post above is a general response for a trading Company. Apologies.
        I can take no responsibility for the use of any free comments given, any actions taken are the sole decision of the individual in question after consideration of my free comments.

        That also means I cannot share in any profits from any decisions made!

        Comment


          #5
          Are you sure the company is not acting purely as nominee for the leaseholders? If so then the company is dormant.

          Comment


            #6
            The RTM company specifically acts for the majority of leaseholders to claim the administration of the service charge account from the Lessor under the lease. It does not trade for profit and company should be declared "dormant" in the annual returns to Companies House. Usually Hmrc will not bother you as they recognise the RTM in the company name means a non-profit company.


            You should open a bank account in the account name " RTM Company Ltd (Client account)" to hold service charge money collected from leaseholders if you are a self managed block. If you appoint a managing agent to run the service chaarge account, the agent will open separate trust bank account for the service charge money.

            You can get more information on "service charge accounts" from the ARMA website.

            Comment


              #7
              Thank you all very much for your help with this.

              It appears I'm not in any trouble with HMRC, but it's probably best if I write to them to confirm the situation.

              We are a private company limited by guarantee, not for profit. The bank account clearly states we are a RTM Company and I suspect that the 'RTM' status explains why HMRC have largely left us alone for the last few years.

              I'll check out the ARMA website. Thanks guys, much appreciated!

              Comment

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