Housing associations

Hi

I have just been approached to take on the accounts for a small housing association. A block of flats where each home owner buys one share of the associaton when they purchase thier flat.

The company run as not for profit with each shareholder contributing an amount equal to the estimated budget of expenditure each year on maintenance, insurance, legal fees etc.

I have two questions.

1.Do I prepare the accounts in the same way as a small trading limited company. Would any thing special need to be included in the narrative in the notes to the accounts regarding the not for profit. If so does anyone have an example of text?

2.What do I do about a CT600, would one be prepared since the comany is not actually trading. If there is a surplus of contributions in a period would this be seen as profit and subject to CT and how whould I account for any surplus, would it go straight into a designated reserve for future use?for example they could save up for future major repairs over a number of years.

I have already advised the treasurer that I am not able to audit the accounts and the M&A's do not require this, which I found quite odd.

Any help would be appreciated

Poodle

Comments

  • K H
    K H Registered Posts: 81 Regular contributor ⭐ ? ⭐
    Housing Associations

    Dear Poodle

    if you refer to a company owning a freehold of a block of flats there are two ways of dealing with this.

    firstly you can prepare accounts in the company showing receipts and expenditure and the freehold as an asset.
    These accounts have to be filed in the normal way at Companies House but hmrc give a concession to the these companies that they do not have to report profits as it is not a trading company therefore no CT600 will be required.

    Alternatively you can just keep the freehold in the company and report income and expenses in a separate account outside of the company.
    you just file dormant company accounts every year and give the members a seperate income and expenditure account.

    i hope this helps


    K H
  • K H
    K H Registered Posts: 81 Regular contributor ⭐ ? ⭐
    Housing Associations

    Sorry i forgot to mention that no audit will be required as it will be well below the threshold for audits.

    K H
  • Poodle
    Poodle Registered Posts: 711
    Hi KH

    The company does not own the building. The occupiers of the flats own their own flats individually.

    The limited company has been set up for the maintenance and repairs to the building and surroundingarea that all freeholders/shareholders are responsible for.

    Poodle
  • K H
    K H Registered Posts: 81 Regular contributor ⭐ ? ⭐
    Housing assn

    Dear Poodle,

    In this case complete the accounts as usual but as i explained the hmrc give a concession for this type of arrangement not to tax it so just send a copy to companies house and the members.(this can be done online and only abbreviated figures have to be sent).
    they occasionally send out letters to the directors to confirm the arrangement but this is not a problem.

    also as i explained no audit is required but the members may require what is known as an 'Accountants report to the directors on the unaudited accounts of X ltd'.


    please come back to me if i can help further


    K H
  • Bluewednesday
    Bluewednesday Registered Posts: 1,624
    If there is any bank interest, isn't corporation tax due on that? I'm asking because I'm not sure as we have clubs that don't have to do CT returns unless they have any bank interest.
  • Poodle
    Poodle Registered Posts: 711
    Hi K H

    Would I still call the P&L 'P&L' appart from the charity option of 'Statement of financial activities' I am not aware of any other wording that would be acceptable in CA

    What would you call the income, 'Maintenance fees/contributions'?

    Plus any rolled forward profits would these be transfered to an account called say 'Maintenance fund'? The equity part of the BS therefore only consisting of two accounts OSC and the fund.

    There are deposits and so gross interest will be received, would this attract CT as BW suggests and so requirne a short CT600 completion?

    I still send off accounts to CH, I posted one set of accounts on line and found it really time consuming

    Poodle
  • K H
    K H Registered Posts: 81 Regular contributor ⭐ ? ⭐
    Housing Associations

    Dear Poodle

    i have checked with hmrc and looked on their website,there is in fact a whole section on this very subject.

    they say that for this type of company it is treated as dormant and subject to review every 5 years.

    for it to have this concession it must not pay dividends.

    i think you can show it as a p&l account and just transfer the excess to reserves and your wording would be fine.

    the hmrc was silent on the subject of interest received so i would assume the same applies and it is not taxable.


    best wishes

    k h
  • farmergiles
    farmergiles Registered Posts: 1,693
    The club accounts that my last practice maintained had to pay CT on the interest earned from the bank but nothing else. Any "profit" is normally returned to the members in the form of lower prices. In your case the funds would build up in the members account until such time as a large bill needed paying and the only tax would be on the interest gained.
  • Poodle
    Poodle Registered Posts: 711
    Dear all,

    All of your help has been vey much appreciated

    Poodle
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