Flat management company

[mathsboy]

Can anyone provide guidance re: the tax treatment of a flat management company.

The property is a converted house and each flat owner has a share of the freehold. They pay into a fund which pays for maintenance and day-to-day running costs of the property.

Is the company subject to corporation tax to the extent that it collects payments in excess of outgoings in any accounting period ?

Thanks

J

[jpcentral]

The company would be subject to Corporation Tax on its profits - which are not necessarily the payments in excess of outgoings. Using accrual accounting methods would possibly mean that some income could be treated as prepayments and there may be items which would qualify for capital allowances. Since you are (presumably) not paying dividends, the first £10,000 of profits are likely to be tax free in any case. If the company is being run solely to maintain the property, it is likely that a set of accounts could be drawn up showing no profit.

The answer above is not based on full information and should not therefore be relied on as providing an accurate interpretation of the likely situation. You are advised to take proper professional advice.


John Perry
Central Business Services
Loughborough

[mathsboy]

Thanks John. I am an accountant but I've not dealt with a flat management company before and was interested to see whether others have. (I was simplifying the measure of profit as income over expenditure.)

Can such a company be treated as a mutual association ?

Thanks

James

[CDavey9501@aol.com]

It may be an idea to set up a residents association for the repairs, collection of monies etc.

Just keep the title in the company and file dormant accounts.

I think there is a useful guide on the subject if you go into the companies house website.

[deanshepherd]

In answer to the original question..

No. Surpluses and deficits on service charges are outside the scope of corporation tax.

Ground rents may be taxable but for most flat management companies the only corporation tax payable will be on the small amount of bank interest received.

An I&E account is usually prepared as oppose to a P&L. The guidance mentioned above can be found on the following link, although there is no reference to tax:

http://www.companieshouse.gov.uk/about/gbhtml/gba9.shtml


Dean Shepherd
dean.shepherd@mmi-online.co.uk
MMI Accountancy
www.mmi-online.co.uk

[mathsboy]

Thanks to all.
James