Finally eliminate all your confusion...

A common query we receive involves whether an RMC or RTM should file dormant or micro-entity statutory accounts. In this article, we’ll provide clarity on these distinctions and explain when trust tax returns or corporation tax returns are necessary. 

What is a Dormant Company?

According to Companies House, a company is considered dormant if it has had no significant transactions during the accounting period. A significant transaction is one that must be recorded in the company’s financial accounts. Typically this means if a company has a bank account and incurs bank charges or interest then it is not dormant. Provided no such transactions occur during the financial period then the company can have dormant company status.

When to File Dormant Accounts?

Most RMCs and RTMs do not hold their own bank accounts. Instead, managing agents often hold separate accounts in trust, preventing the risk of significant transactions. Therefore, these entities generally qualify as dormant since they act as agents for the lessees, not engaging in trading activities.

However, there is one exception; where ground rent is earned the company is not dormant. The receipt of any ground rent, even as little as £1, disqualifies the company from being dormant. In such cases, micro-entity accounts need to be filed, reflecting only the ground rent and related balances. If the ground rent exceeds £500, a corporation tax return is also required.

When is a Trust Tax Return Required?

If an RMC or RTM earns interest, it is technically earned on behalf of the leaseholders so the company will always remain dormant for Companies House reporting purposes no matter the amount of interest income earned. However from HMRCs perspective if the interest income earned exceeds £500 a trust must be registered with HMRC and a trust tax return submitted. 

Note: It's important to check if the interest was taxed at source, which is uncommon but crucial for accurate reporting.

I was going to keep writing a long explanation of each of the different types of scenarios you may find, however I realised that I could provide this information to you in a much easier to digest and easier to understand format… So here is a table I put together to explain what needs to be filed in the various scenarios;

Conclusion

For RMCs and RTMs, understanding when to file dormant versus micro-entity accounts is essential to remain compliant with Companies House and HMRC regulations. Generally, these entities can maintain dormant status unless they earn significant interest or ground rent. In such cases, additional financial reporting and tax obligations arise.

At Qube Accountants, we are here to guide you through these requirements, ensuring your company remains compliant and efficient. If you have any questions or need assistance, please do not hesitate to contact us.