Statutory Accounts Vs Service Charge Accounts

Qube Accountants
53 minutes ago
3 min read

A simple guide for Resident Management Companies

If you’re a director of a Resident Management Company (RMC), you’ll already know that analysing the accounts are part of the role. But it’s very common to feel unsure about the difference between statutory accounts and service charge accounts — especially as both are prepared every year and both relate to the same building/site.

The key thing to know is: they are two completely separate sets of accounts, each with a very different purpose. In this article, we break it all down in plain, easy-to-understand English.

1. Statutory Accounts Explained

Statutory accounts (sometimes called “company accounts”) are the financial statements that every limited company in the UK must prepare and file with Companies House.

Who are they for?

Companies House
HMRC
The company’s shareholders (often the leaseholders themselves)

What do they show?

Statutory accounts show the financial position of the company itself, not the building’s service charge monies.

The statutory accounts usually include:

A balance sheet
A profit and loss account
Notes to the accounts
A directors’ report

Why are they needed?

They are a legal requirement under the Companies Act. Even if the RMC is “not-for-profit”, the company must still file statutory accounts.

What’s included financially?

This is where things often cause confusion.

Statutory accounts only include income and expenses belonging to the company, such as:

Accountancy fees paid by the company
Bank interest earned (if any)

Service charge money does not appear in statutory accounts, because it does not “belong” to the company. It belongs to the leaseholders collectively and must be kept separate.

2. Service Charge Accounts Explained

Service charge accounts relate solely to the service charge funds collected from leaseholders to run and maintain the building.

Who are they for?

The leaseholders
Managing agents
RMC directors
Sometimes, mortgage lenders or potential buyers (on request)

Service charge accounts are not filed with Companies House.

What do they show?

They show how service charge money has been:

Collected
Held
Spent on the building’s upkeep

Typical expenses include:

Cleaning
Gardening
Repairs and maintenance
Insurance
Utility bills
Reserve fund contributions

Service charge accounts focus on transparency — showing leaseholders exactly where their service charge payments have gone.

Why are they needed?

Most residential leases require annual service charge accounts to be prepared and shared with leaseholders. They also support good governance, trust and compliance with the Landlord and Tenant Act.

Are they profit-driven?

No. Service charge accounts are not about profit. They follow a simple income and expenditure or receipts and payments basis, depending on the lease and the building’s requirements.

The goal is simply to show:

How much service charge was collected
How much was spent
Whether there is a surplus or deficit at year-end

3. The Key Differences at a Glance

Statutory Accounts	Service Charge Accounts
Required by law	Usually required by the lease
Filed with Companies House	Not filed anywhere; shared with leaseholders
Focus on the company	Focus on the building’s service charge fund
Shows company’s financial position	Shows how service charge money was collected and spent
Includes only company-owned transactions	Includes only service charge transactions held on trust
Often shows £0 activity for RMCs	Always active – buildings have running costs

4. Why the Two Must Not Be Mixed

A common misunderstanding is to assume that service charge money is part of the company’s income. It isn’t. Legally, service charge funds are trust monies, and the RMC is simply responsible for managing them on behalf of the leaseholders.

Mixing the two sets of accounts would lead to: