Flat-management, RTM and freehold companies: accounts and the CT600

Short version. A residents' management company, right-to-manage (RTM) company or freehold company can file with SimpleCompanyTax whether it is limited by shares (often one £1 share per flat) or limited by guarantee. Enter only the figures that belong to the company itself. Service charge contributions and reserve funds are often held on trust for the leaseholders, depending on what the lease says, and are then not the company's income or assets. Many of these companies have nothing of their own in a year and file as dormant. If HMRC has not asked for a Corporation Tax return, you can file the accounts to Companies House on their own.

The company's own figures

The accounts are the company's accounts, not the building's. Enter what the company itself owns, owes, earns and spends:

• Ground rent the company is entitled to as freeholder, which is its own income.
• Interest earned on money that belongs to the company, which is taxable income of the company.
• The freehold, if the company owns it and carries it as a fixed asset.
• The company's own bank balance, its own debtors and its own creditors.
• Share capital, where the company is limited by shares (for example twelve £1 shares for twelve flats). A company limited by guarantee has none, and the wizard does not ask for it.
• Costs the company pays for itself, such as its Companies House fees.

Service charges and reserve funds

Where a lease requires leaseholders to pay service charges to the company, or into a service charge fund or reserve (sinking) fund, section 42 of the Landlord and Tenant Act 1987 makes the company hold that money on trust for the leaseholders. HMRC's guidance says contributions held on that trust fall outside Corporation Tax and are not the company's income, and that money held on trust is not the company's own asset. It also says the treatment depends on what the lease specifies: an arrangement outside section 42, for example where the lease leaves the residents to arrange services themselves, is treated differently.

We do not decide the lease position for you. If the money is held on trust, keep it out of the company's turnover, out of its cash and out of its reserves, and do not enter the reserve fund as retained earnings. If you are not sure whether your lease brings section 42 into play, check the lease or ask your managing agent or an accountant before you file. HMRC explains the trust in TSEM5730 and the Corporation Tax position in PIM1075.

When the company is dormant

Once trust money is left out, many management companies have had no accounting transactions of their own in the year: no income, no expenses, nothing bought or sold. That company is dormant for Companies House, and you select Dormant on the eligibility step. The balance sheet is then small or nil: the share capital and a matching amount of cash for a company limited by shares, or nothing at all for a guarantee company. Income of the company's own, such as ground rent or bank interest, may mean the company is not dormant for Corporation Tax, and each amount is entered in the field that matches its nature: rent in the property income fields, bank interest in Interest Received. Earning interest does not by itself make the company a trading or property business. GOV.UK explains when a company is dormant for Corporation Tax.

The Corporation Tax return

HMRC decides whether it wants a Corporation Tax return by sending a notice to deliver one. Many management companies never receive one. If HMRC has not asked for a return for the period, choose Companies House only on the review page and file the accounts alone. If HMRC has asked, file the CT600 as well: a dormant company files a nil return, and a company with its own income pays Corporation Tax on it in the normal way.

Box 4 of the CT600 is the type of company. HMRC's Company Tax Return guide lists code 7 for a property management company and points to its own manual, BIM24782, for what that means. The company's legal form does not decide the answer, and neither do we: it is a question about your company's activities and it is yours to answer. The eligibility step asks whether a special regime applies. If you answer Yes, we do not file the return, your company stays in your account, and you can contact support.

Where to enter it

Add the company and we read its type from Companies House. Choose Dormant or the trading path on the eligibility step. On the Financial data step enter the company's own figures only. For a company limited by guarantee the balance sheet shows Members' funds and no share capital rows. On the review page pick the filing targets.

This article is general guidance, not tax or legal advice. The trust rule is in section 42 of the Landlord and Tenant Act 1987, and HMRC's treatment is in TSEM5730, PIM1075 and BIM24782.