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  • £149.89
    No annual charges
    This package is for customers who want the simplest flats management company incorporation with bank account at Barclays or HSBC (optional), all corporate documents produced electronically.
    The following documents will be e-mailed to you upon the registration of flat management company limited by guarantee:
    • The certificate of incorporation;
    • The memorandum & articles of association;
    • The fast-track bank account with HSBC or Barclays.
  • £164.89
    No annual charges
    This is the basic flat management company limited by guarantee formation with HSBC or Barclays bank account (optional) package with additional documents produced electronically & the laminated certificate will be send by post.
    This flats management company registration offer includes all services mentioned in the first option, plus:
    • The meeting of the board of directors;
    • Membership certificates;
    • The company' register;
    • The laminated certificate of incorporation.
  • £207.89
    No annual charges
    This is one of our very favourite property management company registration packages, which comes with the Barclays or HSBC bank account (optional).
    The third option includes all benefits & items mentioned in the second option, plus free delivery of:
    • One set of the memorandum and articles of association with a company's registers printed & top-notch bound;
    • The first meeting of the board of directors, elegant printed membership' certificates & the rubber stamp;
    • The certificate of the beneficial owner.
  • £214.89
    Annual fees from £75.00
    This is the MOST POPULAR property management company set-up packages which comes with the registered office address in London, at Baker Street.
    This company formation offer includes all company registration benefits & items mentioned into the SECOND OPTION, plus the provision of:
    • The registered office address in London;
    • The government mail forwarding;
    • The secretarial compliance service & the certificate of the registered office address;
    • Additional services are available.
  • £149.89
    No annual charges
    This flat management company limited by shares formation package is for customers, who have an address in the UK, & want the simplest offer with documents produced electronically.
    The following documents will be sending via e-mail upon the registration of property management company:
    • The certificate of incorporation;
    • The memorandum & articles of association;
    • The fast track corporate bank account with HSBC or Barclays (which is optional).
  • £164.89
    No annual charges
    This is the basic flats or property management company formation package for such customers, who have a valid address in the UK, with additional documents produced electronically & the laminated certificate will be send by post.
    This company establishment offer includes all services mentioned in the first option, plus:
    • The meeting of the board of directors;
    • Share certificates;
    • The company' register;
    • The laminated certificate of incorporation (free delivery).
  • £207.89
    No annual charges
    This is one of our very favourite UK property management companies' registration packages, which comes with the Barclays or HSBC bank account (optional).
    The third incorporation option includes all benefits & items mentioned in the second option, plus free delivery of:
    • One set of the memorandum and articles of association with a company's registers printed & top-notch bound;
    • The first meeting of the board of directors, elegant printed shares' certificates & the rubber stamp;
    • The certificate of the beneficial owner.
  • £214.89
    Annual fees from £75.00
    This is the MOST POPULAR property management company set-up packages for British customers & expatriates who are looking to get a registered address alongside with the UK properties management company start-up.
    This company setting-up offer includes all LTD registration benefits & items mentioned into the SECOND OPTION, plus the provision of:
    • The registered office address in London;
    • The government mail forwarding;
    • The secretarial compliance service & the certificate of the registered office address.
UK flat management company formation: forming a flat management company is swift and straightforward with Coddan, and our incorporation fees are among the lowest anywhere. We cut out all the unnecessary red tape and flat management company formations services, such as expensive solicitors, and deal directly with Companies House to ensure flat management companies are set up in the fastest possible time - often in a matter of hours - and with the minimum of fuss. Our online flat management company formation application process, which is approved by Companies House, means all clients have to do is fill in their details and submit it, and we do the rest.

We have a range of flat management companies formation packages to suit individual needs, and they start from just £149.89, with no hidden charges or fees. Clients can also get an optional free business bank account with either NatWest or Barclays. In addition, at Coddan, we provide a range of UK flat management company registration services to help people establish their own firms. We have nominee directors and nominee shareholders services, in cases where clients don't have enough officers to propose for company directors, secretary or shareholders, or indeed where people wish to register a flat management company and retain their anonymity & not have their own names appear on the register at Companies House.

Using nominees is especially useful where companies are expanding and don't want competitors to know who is behind a new flat management company setting up in a particular area. We also provide registered office addresses for UK flat management company registration purposes, at prime locations in London and major cities right around the country. This is particularly helpful for those who run their business from home and don't want their address on the public records, as well as not inviting potential inspection visits from the authorities as well as other people turning up unexpectedly, such as creditors.

When your flat management company is formed, we will give you all the legal documentation from the authorities, including certificate of incorporation and our own tailor-made memorandum and articles of association. If you're unsure what kind of company you would like to establish, our expert business formation consultants are available to advise. Talk to us today and let us help you get your flat management company formed, at low costs and in no time. If you need an assistance with flat management company registration, you can also speak to our flat management companies incorporation advisors between 9.30am-6.00pm Monday to Friday by telephoning + 44 (0) 207.935.5171 or + 44 (0) 330.808.0089 (national rates).

  Online Flat Management Company Formation, Forming a Flat Management Company

Flat Management Company Formation Advice, Advantages of Forming a Flat Management Company
Flat Management Company Incorporation With Bank Account & Company Secretarial Agents ...

Flat Management Company Registration Flat management company registration: anyone who is looking to register a new flat management company in the UK can do so within a few hours using one of Coddan's business formation packages. The process can be completed online and your certificate of incorporation and memorandum and articles of association will be emailed out to you. If you start the process early enough in the day and Companies House is not completely swamped then a same day registration is perfectly possible. A range of flat management company formation packages are available with additional options like extra documents, leather bound documentation or a registered office address. Please do get in touch if you would like to talk to one of our advisers about your requirements. We can register a flat management company with your own address and nominated officers, provide notarisation and apostilled documents for UK and overseas residents. If you need assistance with a flat management company incorporation, you can also speak to our business advisors between 9.30am-6.00pm Monday to Friday by telephoning + (0) 207.935.5171.

How to Register a Flat Management Company? Registering a Flat Management Company With Coddan Is Simple & Quick Process



We offer fixed fee for the UK limited company formation with annual account & annual return preparation & filing with government authorities.
The description of our UK company start-up offer:
  • The private company registration within a few hours;
  • The provision of a registered address for one year, & bank account;
  • The preparation & filing of annual account & return.
Our UK company starting-up package is ideal for clients, who need a monthly bookkeeping, the preparation of annual account & its submission with Companies House & HMRC.
Our company formation with bookkeeping services includes:
  • The UK company formation;
  • The registered office address;
  • Display of a company name;
  • The nominee secretary;
  • The business bank account;
  • The provision of HMRC tax agent;
  • Monthly bookkeeping service;
  • The PAYE scheme registration;
  • The preparation & filing the annual return & annual account.
ALL-INCLUSIVE

This UK company formation offer is ideal for such clients, who need to appoint us to deal with the bookkeeping & VAT returns during the financial year.

The registration of a company & and the provision of a legal service address in London.

The provision of a nominee secretary & opening a UK bank account.

Company formation with VAT registration & the provision of the VAT tax agent.

The keeping of the VAT & bookkeeping records & timely VAT submission with the CH and HMRC.

Starting a Flat Management CompanyAre you looking for a quality information & practical guidance how to register a flat management company & start your own flats or properties management business in the United Kingdom, how to register your new block of flats private company limited by guarantee or limited by shares, how-to setting-up and running your property management business; how to select the best type of a business registration form to manage block of flats, how to incorporate a private flat management company limited by guarantee & need a small properties management business start-up advice?Do you need a UK business company formation agent, with the prompt service and an expert advice from the well-qualified professionals whose complementary skills and long experience enable them to deliver the quality service to the UK and international customers on the areas of a new flats management company formations, auditing, bookkeeping, accounting, taxation, corporate management consulting, business maintenance services, trusts' administration, or offshore businesses incorporation service, liquidation, insolvency and limited companies recovery?Are you looking to register a small business in England, Scotland, Wales or Ireland? Do you want to register a limited company for the properties management needs in Belfast, Dublin, Edinburgh, London, Manchester, or Sussex? Do you have an idea for starting a new property management business in the Great Britain, and want to register a limited liability company for the management needs, or to create a new firm now? On our web-site, you can get all information on choosing and registering the right legal structure for your properties management business, legal tips on day-to-day business operations, & an overview of the employment law issues, and much more.If you have an idea for starting a flat management business in the UK, forming of a private LTD company online, becoming or registering as a private company limited by guarantee - we can assist you and provide the higher standard of support for starting-up a flat management business & registering a company online directly from the ground up. The better the company's structure is prepared upon registration, the better results can be achieved on the later stage.It is our job to assist in evaluating the options available at the beginning. In addition, we offer services regarding the formation of flats management business entities in the UK, EU, and offshore (companies and partnerships) - register your manage of properties company with us, and enjoy the full support of the excellent & fully trained team of Coddan. During our organisation's experience, Coddan has rapidly expanded its portfolio of offshore international and local companies creation, - this is the result of the quality service we offer & the trust our customers place on us. We are dedicated to deliver quality and professional companies incorporation services to our clients worldwide, to enable them to run their businesses more cost-effectively and efficiently.Residents' management companies are also known: -

  • Block management companies
  • Flat management companies
  • Residents associations
  • The management company
In law, a limited company is a 'person' in its own right. This means it can own property (such as a freehold or leasehold) and enter into contracts in its own name. It exists independently and separately from the people who manage or own it. When a property is divided into a number of flats, each flat owner usually has a lease of their own flat, but they may also be a member of a management company that owns the freehold (or lease) of the entire building.As members of the company, the flat owners have their say in running it. If the members own shares in the company, it is common practice in the company's constitution (its articles of association) that members who sell their flats must also transfer their membership to the new owners. This ensures that, at any given time, the company limited by guarantee represents the interests of all the current flat owners, and it remains a separate legal entity regardless of who holds its membership.If your entity is a company limited by guarantee, it means that the members have agreed to contribute to the assets of the company if it is wound up.The minimum requirements for the registration of a flat management company limited by shares: -

  • A private company must have at least one director, one shareholder (or the member), and may have a secretary.
  • You need at least one person to form this type of the company. If there is only one director, and that director is a natural person in your company, that director can also act as the secretary and/or shareholder (member).
  • A company must have at least one director who is a natural person. This requirement is met if the office of the director is held by a natural person as a corporation sole or otherwise by virtue of an office.
  • You can register a sole director' company, if you are familiar with the secretaries duties and responsibilities, because all of them belongs to a sole director.
  • The Companies Act imposes no restriction on the minimum age of company directors. However Companies House will actively discourage the appointment of anyone under the age of 16 from taking up a company directorship on the grounds that the individuals concerned may not fully understand the legal liabilities that go with the position and for the most part will not have the experience necessary to perform the duties of a company director.
  • Under the Companies Act 2006, there is no restriction on any or all of the members/shareholders being from an overseas country (i.e. outside the United Kingdom in terms of residency, domicile, citizenship, place of incorporation or all or any of those concepts).
  • There is no requirement for the officers of your company to be UK citizens or residents, nor for them to hold valid work permits.
  • Owning, or being an officer of a UK company does not, however, grant you any right to live or work in the UK if you are a foreign national.
  • Your flats management company must have a registered office address within England or Wales or Scotland; this is the official address of your company and will be on the public record as such.
  • Your flats management company must hold its official company documents at its registered office address: its register of shareholders (or members), and its constitutional documents.
  • So long as you maintain a registered office address in England or Wales, or Scotland, you can conduct your business from any place in the world: you do not have to run your business from the registered office address.

What We can Do for You: Flats Management Company Formations Agent vs. Companies House

Flats Management Company FormationCoddan is the UK companies' (limited by shares or limited by guarantee) formation agent, certified accountants and business consultants' firm with many years of experience in assisting clients with business incorporation needs in the United Kingdom (England, Wales, Scotland and Northern Ireland), as well as with the set-up and formation of the offshore tax-free companies, offering in most circumstances the same-day online flats management companies registration services for the UK residents & as well as for non-UK based customers. Our expert knowledge and extensive experience of setting-up of property management businesses and management companies' structures has made us possible to provide the very professional, prompt, and the most efficient flats management companies' incorporation level of services.Our team of tax-advisors and incorporation consultants will be pleased to assist with your enquiries related to establishing & maintaining the limited liability flats management companies or creating the more complex corporate legal & the tax-savings structures. On our web-site, you will find the number of useful tips and legal information, downloadable documents, which may help you to learn what to take into the consideration when deciding among the companies limited by shares registration, private limited companies by guarantee formation, setting-up of the properties management entities, registering as the single or blocks' of flats management companies, establishing of other business structures. Our great value the UK FMC company formation price starts from just £149.89, we consistently provide the quality business registration assistance & the best incorporation service to satisfy our valued customers - you will receive the personalised telephone & e-mail help that you really need!Coddan' flats management companies formation phone lines provide the confidential incorporation advice, business creation support, and the access to the pastoral care for business consultants & London based certified accountants. Some of our help lines can also be contacted via the phone, or via the online help advisors, or even by an e-mail and by fax. Our team of friendly flats management companies formation staff (who are all convincing specialists) is on hand to ensure that your move goes through as smoothly and swiftly as it possible.Confidential flats management business companies formation advice & support services have been provided from our premises at 124 Baker Street, in London. We are committed to providing the comprehensive range of the properties management incorporation services and ensure that we offer the legal registration services that blend professionalism with the friendly, and informal approach. By doing so, we remove the mystique that sometimes surrounds our profession, we believe that each client has an individual and specific legal requirements and therefore provide a prompt & professional incorporation service, which is individually tailored to the particular needs of each of our customer. By doing so, we are able to advice & assist in the clear, direct, and the cost effective business registration manner.Our business is international - we offer a wide range of legal incorporation services to multinational, public & private clients and entrepreneurs in different business industries. Our firm deals with transactions of all sizes and complexity combining global and local expertise on behalf of clients in the UK, including the Northern Ireland, Republic of Ireland, and the Isle of Man, & around the world. In addition, we also advise foreign customers on starting and doing business in England, Wales, Scotland, Northern Ireland, Republic of Ireland, and the Isle of Man & in other offshore countries. We can provide you with a wide range of company-related legal advice covering all aspects of the start-up, trading activities and business expansion in the UK and overseas as well as realising value.If you prefer to order flats management company registration by phone or via e-mail, or if you would like to place an order at our office, for an initial discussion, with no obligation please call us at +44 (0) 207.935.5171, or 0330.808.0089 and benefit from our personal guidance in registering the company limited by guarantee or limited by shares. We are looking forward to serving your business needs.

Useful Tips:


There is no requirement for the officers of your company to be the UK citizens or residents, or for them to hold the valid work permits. Owning, or being an officer of the UK company does not, however, grant you any right to live or work in the UK if you are a foreign national. A flat management company must have at least one director, one shareholder (member), and may have a secretary.

Starting a New Flats Management Business: Online Flats Management Company Formation

Starting a Flat Management CompanyMany small businesses choose to use the services of flats management companies formation agents, like Coddan; to undertake all of necessary formalities on their behalf. Our aims are to provide you with the professional, affordable range of business support services to enable you to incorporate and run your own successful flats management business.We offer one of the most customisable, cost-effective, and affordable properties management company set-ups for small businesses. Unlike other companies providers and companies formation agents, who hide up the front of incorporation costs, our fees are very simple. We offer a new flats management company incorporation only for £149.89 - no hidden costs, annual fees, memberships or other pricing strategies. In fact, we guarantee that our flats management business registration and management service fees are the lowest that you may find.Starting a new flats management company under new Companies Act 2006, is not particularly complicated.There is a still requirement that application for the flats management company registration should be submitted to the Companies House with the signed copies of the memorandum and articles of association (if company chooses to file one). There are no more requirements that application for management company registration to be signed in front of the notary public, solicitor or a commissioner of oath, but application itself is now a bit more complicated then old forms 10 and 12 used for the company formation before final implementation of Companies Act 2006.Application for the flat management company registration must contain the following information: -

  • The proposed of a company name
  • The location of the registered office address
  • The type of the company to be registered
  • The type of the model articles of association to be used (if company chooses to use the model of articles provided by the Companies House)
  • The statement of the proposed officers
  • The statement of the capital & initial shareholding (or membership) or statement of the guarantee for companies not having share capital
  • The statement of the compliance
Coddan can make all this process much simpler for you. When applying for online flats management company incorporation service from Coddan, all you need to do is to complete our online incorporation order form for the type of a company you have selected and we will take care of formalities.When applying for a flat management company formation with Coddan, our clients have the option to choose from the standard memorandum and articles of association provided by us and the customised articles of association drafted by our specialists. Customised articles of association prepared by Coddan provides the full description of the company's proposed activity, share (or membership) capital, the location of the registered office address, rights & responsibilities' of directors and shareholders (members) and much more.We can also register your flats management company using your own memorandum and articles of association. You just need to complete our online registration order form, and then e-mail us the memorandum and articles of association that you want to register your flats management company with us. However, please make sure that your memorandum and articles of association complies with the requirements of new Companies Act 2006. If your application will be rejected by the Companies House, due to the provision of the wrong documents, Coddan will not be able to offer you refund for flats management companies registration process.

Important Note:


A residents management company (RMC) protects the interests of the leaseholders. RMC's typically manage common parts of the building although they may have other responsibilities. Your property probably has parts common to all the flat owners living in it: boundaries, roofs, halls, drives and gardens being typical examples. These all require maintenance, insurance, lighting, etc. Call us to discuss your needs and see how we can help.

Incorporate a FMC Company Online: What Does a Flat Management Company Do?

Flat management companies typically manage common parts of the building. They may have other responsibilities. Your property probably has parts common to all the flat owners living in it: boundaries, roofs, halls, drives and gardens being typical examples. These require maintenance, insurance, lighting, etc. The individual flat owners usually fund these costs, by making periodic contributions into a pooled fund.Many flat management companies choose to account for these transactions within the company. If your company just pays a few bills, perhaps for repair or maintenance, then your advisor may say that these payments need not go through the company's books. Less formal arrangements, such as collecting the money through a residents association, may be satisfactory.The company could then continue to own the freehold (or head lease) of the property, but it would conduct all accounting transactions elsewhere - the company would then be 'dormant'. You would still have to prepare accounts, present them to members, and submit them to Companies House and HMRC, but all that would mean is a simple balance sheet that does not have to be audited. You should seek professional advice before adopting this approach to ensure that you are complying with the legal requirements.

Important Note:


Residents often use a limited company for collecting a central pool of cash for carrying out repairs and maintenance to common parts of the property. If a limited company used in the management of a block of flats, it is often a condition of buying a flat that the buyer becomes a member or shareholder of the company. Call us to discuss your needs and see how we can help.

Do You Need a Flat Management Company? What is a Flat Management Limited Company?

Flat Management Limited CompanyIn law, a limited company is a 'person' in its own right. This means it can own property (such as a freehold or leasehold) and enter into contracts in its own name. It exists independently and separately from the people who manage or own it. There are different types of limited company: "public companies", whose shares can be bought and sold by the general public, and "private companies". It is unlikely that a public company would be suitable as a flat management company. When a property is divided into a number of flats, each flat owner usually has a lease of their own flat, but they may also be a member of a management company that owns the freehold (or lease) of the entire building. As members of the company, the flat owners have their say in running it. If the members own shares in the company, it is common practice in the company's constitution (its "articles of association") that shareholders who sell their flats must also transfer their shares to the new owners. This ensures that, at any given time, the limited company represents the interests of all the current flat owners, and it remains a separate legal entity regardless of who holds its shares.Some limited companies do not have shares and are instead "limited by guarantee". In England and Wales, this includes commonhold associations and the "right to manage" companies. If your company is limited by guarantee, it means that the members have agreed to contribute to the assets of the company if it is wound up. In this web-page, the term a "shareholder" and "member" means the people who own the company. Instead of having a company, you may wish to consider two other options: -

1. If your organisation does not own property but simply collects money from residents for repairs and maintenance, and pays bills when they arise, then less formal arrangements may be appropriate such as a residents association.
2. Residents could consider buying the freehold of their properties in their own names or as trustees.
If you are uncertain whether the options above are appropriate for your circumstances you may want to seek professional advice.

Important Note:


The RMC residents management company will have a memorandum and articles of association specially drawn up to allow the company to own, manage and administer a leasehold or freehold property, which is normally divided into several dwelling units or flats, with each leaseholder owning a share in the company. The leaseholder will be obliged to transfer the ownership of the share to the new leaseholder when disposing of the property.
Call us to discuss your needs and see how we can help.

Why To Register or Incorporate a Property Management Company?

There are many reasons for forming and registering a limited company. Outlined below are a few reasons, which relate to flat management companies. This list is not exhaustive.One reason for residents in a block of flats to have a limited company is to own the freehold or head lease. Freehold gives outright ownership of the property to the limited company. A head lease is a lease granted directly to the limited company, which turn grant subleases of the property (or parts of it) to the flat owners. For the purposes of this web-page, the difference between a company that owns a freehold and one that holds a head lease is immaterial.However, residents often use a limited company for collecting a central pool of cash for carrying out repairs and maintenance to common parts of the property. If a limited company is used in the management of a block of flats it is often a condition of buying a flat that the buyer becomes a member or shareholder of the company. In some cases all flat owners automatically become directors.Another reason to set up a limited company is so that leaseholders of flats can exercise their right to manage the building they live in. The right to manage must be exercised through a limited company set up for that purpose. This type of company is called a right to manage (RTM) company (please refer to the relevant section of our web-site).A limited company would also be set-up to own and manage the common parts of a development made up of separate units under commonhold ownership. This type of company is called a commonhold association.

Incroporate a British Flat Management Company: How Does a Flat Managament Company Works?

Incroporate a Flat Management CompanyIn law, a limited company is seen as an 'individual' in its own right. This means it can own property (such as a freehold or leasehold) and enter into contracts in its own name. It exists independently and separately from the people involved. As the name suggests, many are connected to blocks of flats where an arrangement needs to be made to deal with the running, maintenance and repair of the common parts of the building.The leaseholders of the flats are the members of the company, some will be appointed to act as directors and one will usually be the company secretary. They may appoint a managing agent to carry out the day-to-day work, or one may be specified in the leases with the freeholder.The freeholder of the land on which the flats stand may be held by a third party, or it may be held by the management company (so that the leaseholders have the ultimate benefit of the freehold). The simplest form of flat management company is a dormant one which holds the freehold of the land for the members of the company, who are leaseholders of the flats built on that land.This type of company can also provide a structure for the management of the common parts of private freehold estates of houses, which may include roads, communal gardens, security and other facilities. A corporate body is needed to hold land, unless there are four or fewer lessees concerned, in which case the freehold of the land could be held jointly in the lessees' own names.However, if the freehold is held directly by the lessees jointly, then each time a flat changes hands, apart from the transfer of the lease on the flat, there would need to be a transfer of the freehold into the new set of names in the Land Registry. Getting all the necessary signatures and consents would take time and add to costs. The use of a flat management to hold the freehold avoids the problem.A flat management company may be incorporated under the Companies Acts, either as a limited company with shares, or a company limited by guarantee. Either of these forms of incorporation provides limited liability for its members, subject to the usual caveats in the insolvency legislation about trading properly. Each also provides a corporate vehicle that can hold the freehold (or head lease) which underlies the various occupiers' leases.It can also collect maintenance charges and any ground rents, hold a sinking fund for major repairs, arrange cleaning, decoration, security, insurance, a warden's salary for sheltered schemes and janitorial or concierge services where appropriate.The company limited by shares was designed for profit-making enterprises, but with properly drafted articles also works well for flat management companies. When the related property interest changes hands, the leaseholders' share also has to be transferred by a stamped stock transfer form (often for a token payment with minimum (5.00) stamp duty paid) and the change recorded in the register of members. Coddan's articles provide a special procedure to facilitate the transfer of the relevant share if a lease has changed hands but the transfer of the share was overlooked.The company limited by guarantee was intended to provide a form of incorporation with limited liability suitable for a group of members with a mutual interest of a not-for-profit nature. The main advantage of using a guarantee company rather than a company limited by shares is that no stamped transfer is needed on changes of members (on sale of the related lease). The articles can simply provide for the membership of the outgoing lessee to terminate automatically when they cease to hold the lease, without the need for any document to be signed by that member giving up their membership. The new owner of the lease can then be admitted to membership in place of the outgoing member.

Why Have a Flat Management Company In England, Wales, Scotland or in Northern Ireland?

Why Have a Flat Management CompanyFlat management companies are companies used to manage the whole of or parts of a site or building on behalf of its owners. When there are multiple tenants, Flat Management companies are normally used to protect the interests of the leaseholders. In shared properties there are often a number of areas that are common and used by all flat/unit residents.For example, communal halls, access areas and gardens. By having a Flat Management Company you can establish a system for collecting pooled funds in order to maintain and repair any common areas. If the company will not own the freehold for the entire property then it may not be appropriate to have a Flat Management Company. A residents association may be more suitable.Many tenants and owners of properties in the UK make contributions to management companies and various service charge funds or sinking funds. These funds pay for a variety of services and sometimes accumulate money for future repairs. Typically, residents of a block of flats will all pay a set amount each year into a fund. That fund will either pay for joint day to day running costs of the block, such as cleaners and minor repairs, or funds will be put aside to pay for future major expenditure such as a roof repair. Some funds may do both within one fund.The charges may typically be paid to a management company, which could manage just that block of flats or any number of blocks. Sometimes residents of a block will set up their own management company, residents' association or trust to receive the funds and carry out the work. Sometimes the landlord/freeholder holds the funds and organises the work.What if a member sells their flat? If the company is limited by shares, the company's articles of association will usually require the seller to transfer the shares to the buyer. If the company is limited by guarantee, then the company's articles of association may require the seller to sign a form to resign as a member (forms should be available from the company secretary) and deliver it to the company: or the change of membership might happen automatically, depending upon what the articles say.The constitution of a flat management company: a flat management company has its own memorandum and articles of association specially drawn up to allow the company to own, manage and administer the property, which is normally divided into several dwellings, units or flats. When a property is divided into a number of flats, each flat owner has a lease of their own flat but they may also hold shares in a management company that owns the freehold (or lease) of the entire building.From time to time, it may be necessary to change these documents. You can make these changes by a special resolution or a written resolution (that is proposed as a special resolution). The nature of the change may be subject to other statutory procedures and requirements. For example, if a company wishes to change its name, it does so by passing a special resolution.Transfer of shares: change of the ownership -as shareholders or members, of the flat owners have their say in running the company. Normally, the company's constitution will say that shareholders who sell their flats must also transfer their shares to the new owners. This ensures that - at any given time - the limited company represents the interests of all the current flat owners. However, it remains a separate legal entity regardless of who holds its shares from time to time. The same aspect applies for companies limited by guarantee.Service charge funds & sinking funds background: many tenants and owners of properties in the UK make contributions to management companies and various service charge funds or sinking funds. These funds pay for a variety of services and sometimes accumulate money for future repairs. Typically, residents of a block of flats will all pay a set amount each year into a fund. That fund will either pay for joint day to day running costs of the block, such as cleaners and minor repairs, or funds will be put aside to pay for future major expenditure such as a roof repair. Some funds may do both within one fund.The charges may typically be paid to a management company, which could manage just that block of flats or any number of blocks. Sometimes residents of a block will set up their own management company, residents' association or trust to receive the funds and carry out the work. Sometimes the landlord/freeholder holds the funds and organises the work.Typically there are two main types of fund to which Section 42 LTA 1987 applies. Sinking funds involve the long term setting aside of funds for major repairs and renewals. Over a period, the fund can grow to a significant size and generate substantial investment income. Service charge funds are funds where the intention is to cover only the routine day-to-day costs of maintaining the communal areas and paying for minor repairs and decorations. The service charges are reviewed annually and set at a level to balance the actual expenditure and leave a 'no surplus - no deficit' situation at the end of each year. In practise there may be a small amount held in reserve or carried over from the previous year. The trust will not accumulate any surplus charges or create any sort of contingency or sinking fund. Any investment income is derived only from the short- term deposit of temporarily surplus funds. Some trusts will act both as a sinking fund and as a service charge fund, although usually the trustees would keep the two funds separate.There are a number of different situations in which sinking funds or service charge funds may be created. Not all of these will necessarily fall within the scope of Section 42 LTA 1987.Operating as flat management companies: tenants of rented property - under the terms of a rental contract either the tenant or the landlord will be responsible for repairing the property. If the landlord includes in the rent payable some figure to cover his repairing obligations the fact that the payment by the tenant will be part of his rent will not preclude the operation of Section 42 LTA 1987. However, in order to fall within the definition of 'service charge' the amount must be variable according to the costs or estimated costs of repairs etc.So if the lease simply states that part of the rents payable will be used for servicing, repairs and maintenance etc. for which the landlord is then responsible then the matter is outside Section 42 LTA 1987 because the payments by the tenants do not amount to a 'service charge' as defined in Section 18 LTA 1985. The whole of the rent will be Schedule A income of the landlord.Leaseholder owners of property - under the terms of the lease the leaseholder may have to pay into a service charge fund or sinking fund. The funds may be paid to an individual, a company, a trust or an unincorporated association. As the owner owns the property under a lease, the LTA 1987 will apply. If the lease specifies contributions are to be made to a service charge fund or sinking fund then an accumulation trust exists whether the funds are paid to an individual, a company, a trust or an unincorporated association.The body holding the funds may not consider themselves to be trustees, for example a company. However if Section 42 LTA 1987 applies then the company will be holding the funds as a trustee.If the lease stipulates that tenants must pay a service charge for particular services to a service company which is not the landlord, connected with the landlord or stipulated by the landlord, this too is within Section 42 LTA 1987. In that Section 'the payee' is defined as 'the landlord or other person to whom any such charges are payable by those tenants under the terms of their leases'. If the lease states that the tenants should arrange for services, repairs and maintenance etc. themselves but does not specify how this should be done, any arrangement made by the tenants with a service company is outside the scope of Section 42 LTA 1987. The costs in respect of service charges are not made either to the landlord or to another person to whom such charges are payable under the terms of the lease.Finally where there is no provision in the lease for the tenants to pay into a service charge fund, but nevertheless they decide to create one, then such an arrangement is not within Section 42 LTA 1987 as the tenants are not 'required under the terms of their leases to contribute to the same costs by the payment of service charges'.Freehold owners of property - under the terms of sale of a freehold property (a covenant of some sort) the freeholders may have to pay into a service charge fund or sinking fund. The funds may be paid to an individual, a company, a trust or an unincorporated association. Such an arrangement does not come within Section 42 LTA 1987 as it is not under the terms of a lease. Alternatively there may be no provision to create a service charge fund or sinking fund but the freeholders together decide to form one.They may decide to pay those contributions to an individual, a company, a trust or an unincorporated association. Again this is a private arrangement not governed by Section 42 LTA 1987 and the tax treatment depends on what the freeholders decide is going to hold the funds.Registered social landlords & other 'exempt landlords' - registered Social Landlords (RSLs) are, in England and Wales, independent, private sector, non-profit making bodies whose main purpose is to provide decent quality, affordable housing for people on low incomes. About three-quarters of them are charities. Section 42 LTA 1987 does not apply to tenants of 'exempt landlords' (Section 42(1) LTA 1987). In accordance with Section 58(1)(g) LTA 1987 a RSL is an exempt landlord. There are other exempt landlords defined in Section 58(1)&(1A) LTA 1987 such as district councils and certain development corporations. See TSEM5745 where Section 58(1)&(1A) LTA 1987 is reproduced.Whilst Section 42 LTA 1987 does not apply to RSLs and other exempt landlords, as explained below, the terms under which sinking funds and/or service charge funds are held by exempt landlords may still create a trust. Thus, in summary, reference must be made to the terms of the lease to determine the application of Section 42 LTA 1987. A statutory trust will arise where the tenants of two or more dwellings are required under the terms of their leases to contribute to the payment of variable service charges to the landlord or other persons to whom such charges are payable under the terms of the leases. However, Section 42 LTA 1987 does not apply where the landlord is an 'exempt landlord'.Investment income previously charged to corporation tax: in the past some flat management companies have been permitted to make returns in respect of investment income, arising on service charge funds and sinking funds, as part of their corporation tax returns (see PIM1070). That is no longer appropriate where trustees are holding funds as trustees under Section 42 LTA 1987. Likewise where Section 42 LTA 1987 does not apply but the terms under which the funds are held creates a trust.Rents receivable by flat management companies (such as ground rents - other than peppercorn rents) are outside the scope of Section 42 LTA 1987 and remain chargeable under Schedule A. Tax Bulletin Issue 37 (October 1998) explained the approach the Inland Revenue will take for all flat management companies as from 1 April 1998. However, because of the need to issue further guidance in Tax Bulletin Issue 48 (August 2000), no action will ordinarily be taken to disturb any year or Accounting Period for which a Corporation Tax return has already been made and accepted. Where a trust return has not previously been made by a flat management company, or a trustee, of investment income arising from a fund within Section 42 LTA 1987 (or from funds otherwise specifically held on trust), the trustees will have the normal obligation to notify chargeability.Notification from company's tax office: where you receive a notification from a tax office dealing with the company's corporation tax, that a flat management company trust has been identified, you should set up a new record, and issue any trust SA returns, which are required. The company tax office will advise you as to the date from which trust liability first arises, and this can be from any date in the tax year. If for example the CTSA return covers the accounting period to 31st August 1999, the first period of trust SA liability will be the part year from 1 September 1999 to 5 April 2000.Residential service charges: Section 42, Landlord and Tenant Act 1987 (LTA87/S42) provides that contributions to variable service charges (and to sinking funds) in respect of residential property should be paid into a trust fund.Under the old CT Schedule A rules (which applied up to 31 March 1998), the Revenue (now HMRC) took the view that service charges received by flat management companies were normally within the scope of Schedule A notwithstanding the provisions of LTA87/S42. This was because the charge under old Schedule A was based on the receipts to which a landlord was entitled in a chargeable period - old ICTA88/S15 (1) 2. However, where service charges received by occupier controlled flat management companies were matched over a period of up to five years by admissible expenses, no Schedule A charge was normally imposed.HMRC has been asked whether the position has changed under the Schedule A rules introduced by FA98/S38 and FA98/SCH5. Under Schedule A, it is necessary to consider the profits of the Schedule A business (calculated, in the first instance, in accordance with Schedule D Case I rules and correct accountancy principles). As from 1 April 1998, residential service charges received by occupier controlled flat management companies will ordinarily be outside the scope of Schedule A since, under correct accountancy principles, it will not usually be correct to include in the computation of profits sums to which the landlord is not beneficially entitled.Consequently, where an occupier controlled flat management company receives residential service charges for periods subsequent to 31 March 1998, such sums will ordinarily be received as capital in the landlord’s capacity as trustee (under LTA87/S42). Investment income arising on such sums held in a designated bank account will be chargeable on the trustee at the rate applicable to trusts (Section 42 contains an implied power to accumulate).Rents receivable by flat management companies (such as ground rents - other than peppercorn rents) are outside the scope of LTA87/S42 and remain chargeable under Schedule A.This article sets out the line the Revenue (now HMRC) will take for all flat management companies as from 1 April 1998 but no action will ordinarily be taken to disturb the treatment accepted on specific cases prior to that date.Where a trust return has not previously been made by flat management companies of investment income arising from a fund within LTA87/S42 (or from funds otherwise specifically held on trust), the trustees will have the normal obligation to notify chargeability.If you are unsure of the best course of action for your business, Coddan can advise you on the best location and type of business entity, and can tailor a solution to your needs.


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