In both cases, the company must file with Companies House annual accounts and an annual Confirmation Statement. For HMRC it has to file the accounts for its first accounting period, together with the related Corporation Tax Return. HMRC may agree to class the company as dormant for Corporation Tax purposes for at least the four subsequent accounting periods.

 Additionally, Service Charge accounts have to be prepared annually in order that the leaseholders are able to monitor that the company has been properly discharging its responsibilities in collecting service charges and spending the monies and by maintaining reserve funds.

  Service charges collected are put on trust for the benefit of the leaseholders.

  Service charges cover the costs of the repair and maintenance of the communal areas of the building, the cost of insurance and also professional fees, such as those made by a managing agent. The lease determines the matters for which service charges can be made.
 

  A reserve fund may be maintained to cover general repairs and maintenance costs. A separate fund may be set up to cover a specific major item of future capital expenditure, such as the cost of replacing the roof of the building. 
 

  A set of Service Charge accounts includes an Income and Expenditure account and a Balance Sheet. It has to be prepared within six months of the end of the accounting year. Leaseholders have the right to inspect the supporting receipts and documents related to the Service Charge accounts.

 The accounts are examined by an independent accountant. The accountant carries out a programme of work and makes a "Report of Factual Findings" on the Service Charge accounts. 

  New legislation is being brought in which will strengthen the requirement to have service charge accounts prepared and which will prescribe the format of those accounts.

  We prepare residents management company accounts and act as independent accountant for the Service Charge accounts in situations where the building in question contains up to four leasehold properties.

  Some leases specify an audit requirement. ACCA and ICAEW have indicated that where a pre 1980 lease contains a requirement for service charge accounts to be audited, this can be ignored because of the looser meaning of 'audit' that prevailed before 1980. Therefore for a pre 1980 lease that relates to up to 4 leasehold properties, we can act as the independent accountant to prepare a Report of Factual Findings. However, if the lease containing an audit requirement is dated since 1980, we are not an auditing firm and therefore we would not be able to act.

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