Will my Flat Management Company pay Corporation Tax?

Many companies have been set up under the Right to Manage and manage Flat for Tenants.

Provided the following apply you probably won’t have to complete Corporation Tax Returns or pay Corporation Tax

1. The only income received by the company are the service charges paid by the property owners.
2. The income is expended on the day to day maintenance and management of the complex.
3. Surplus income is transferred to deferred income for future maintenance expenses.
4. No deposit interest is earned in the year.

The guidance on the HMRC website is as follows:

Tax for the limited company

You must send a Company Tax Return to HM Revenue & Customs (HMRC) no later than 12 months after the end of the company’s first financial year.

After you do this, HMRC may decide to treat your company as ‘dormant’ – this means that they wouldn’t expect your company to send Company Tax Returns for later years.

They may do this if your company does none of the following:

• allow directors who aren’t residents or leaseholders to be appointed in its articles of association
• does more than manage the property in the interests of shareholders
• make a profit
• need to pay more than £100 in Corporation Tax in a year
• get any income from land
• pay dividends or other payments from profits to shareholders
• own any assets it is likely to dispose of which would give rise to a chargeable gain
• make payments that need to be taxed

They will write to the company if they decide to treat it as dormant.

When the company must always send a Company Tax Return

Your company must send a Company Tax Return every year if:

• HMRC doesn’t write to confirm they think the company is dormant

• the company starts doing any of the things in the list above, even if HMRC has previously said the company is dormant

steve@bicknells.net