Websters Accountants - Property Accounting & Property Auditors

Residential Property Services

Websters’ expertise in service charges is valued by residential landlords and managing agents for blocks of flats and residential estates of all sizes. This is reflected by the number of sites spread across the UK for which we act.

We perform all aspects of residential property management accounting and audit work and are the leading firm in the UK in this field. To our knowledge we are the only firm of accountants in the UK who exclusively provide services to clients in property management.

Residential property service charge funds present many challenges and require certain mandatory compliance. In order to meet these challenges, we offer the following services:

Service charge accounts preparation

We prepare service charge accounts from records covering the whole spectrum from books of prime entry to state of the art property accounting software. Our accounts follow current best practice and include an income and expenditure account (apportioned by schedule where applicable), a balance sheet, reserve fund statement and individual lessee apportionment as standard.

Certification of service charge accounts

Under the Landlord & Tenant Act 1985, all residential properties with 5 or more units require an annual statement of service charge costs to be certified by an independent chartered accountant who must be a registered auditor.

We offer audit services ranging in depth from a level to comply with the above minimum requirement through to a 100% test basis with testing of all balance sheet accounts, reserve fund statements and apportionments between units.

Our certified accounts give assurance of accuracy and transparency to the landlord, management company (where applicable), managing agent and lessees. The advantages of our service are clear:

• Provides cost transparency to the lessees
• Provides improved compliance with latest best practice (eg, guidance from Association of Residential Managing Agents “ARMA” and the Institute of Chartered Accountants in England and Wales “ICAEW”)
• Ensures accurate cost allocation enabling better understanding of the accounts by the lessee
• Educates managing agents and landlords of the need for accurate coding to enable higher quality information to be provided from their system during the year
• Eliminates inclusion of costs not recoverable under the terms of the lease
• Ensures proper matching of costs to the correct period, reducing service charge fluctuations year on year
• Accurate year end statements enable more accurate budgeting resulting in a more even spread of demands to lessees

Taxation compliance of the service charge fund

Under the Landlord & Tenant Act, all service charge funds are held by the Landlord in trust for the tenants. Therefore a trust is created for tax purposes and any interest earned on funds is taxable.

Trust tax returns:

• Preparation of trust tax returns and responsibility for all compliance and correspondence with HM Revenue & Customs.

Management company statutory accounts and taxation compliance

A company is often formed with the responsibility to control, supervise and maintain the property. This company’s members are the lessees of the property giving the occupiers a vehicle for formal management of the property with each member having an equal say.

Accounts:

• Preparation of management company statutory accounts in compliance with the Companies Act and relevant accounting standards.
• Responsibility for filing requirements at Companies House.

Corporation tax:

• Preparation of corporation tax returns for management companies and responsibility for compliance and correspondence with HM Revenue & Customs (“HMRC”).

Where a management company has its own income (eg. ground rent) there is an obligation for the company to file a corporation tax return each year. In our experience many management companies file corporation tax returns where there is no need to do so. In this situation we would arrange for such companies to be registered as dormant with HMRC negating the need for future returns.

Statutory audit of management company accounts

This is not recommended in the case of the majority of situations where the management company does not have a legal requirement to be audited. Where such a legal requirement does exist (eg. where the company has been controlled by a ‘large’ company during the accounting year such as a developer) we can provide the required audited accounts at a competitive price.

Company secretarial services

Maintaining the management company’s statutory records on behalf of the company’s appointed company secretary. This includes:

• Maintaining the company’s records on an automated secretarial system compliant with Companies House electronic filing system
• Completion and filing of statutory forms eg. directors’ appointments/resignations
• Updating the member’s register for any changes and issuing the appropriate share certificate or member’s certificate (normally when there is a change of lessee)
• Preparation of the annual return and filing at Companies House
• Provision of a Registered Office for the company (if requested)

Managing agent’s client accounting

For managing agents we provide the following services:

• Reviewing managing agent’s client accounting to test for compliance with regulatory body’s rules eg. Royal Institute of Chartered Surveyors (‘RICS’), Association of Residential Managing Agents (‘ARMA’).
• Completion of independent Annual Review and certification as required by ARMA.

(Note: An independent annual client account audit is no longer a requirement of RICS).

Looking forward

The Commonhold & Leasehold Reform Act sets out how to present the accounts to lessees and this part of the Act is expected to become law during 2010.  This will change aspects of residential service charge accounts preparation and Websters will be advising clients on the changes to their current methodology required to meet the new legal obligations.

RTM Companies

The Commonhold and Leasehold Reform Act 2002 provides a right for leaseholders to transfer the Landlord’s management functions to a special company owned and controlled by them.  The right was introduced, not just as a means of relinquishing control from bad landlords and managing agents but also to enable leaseholders, who normally own the majority of value within the property, to take full responsibility for control and management. This right to manage is available to all leaseholders where at least 50% of the leaseholders within the property agree to support the application to the landlord.

In most cases‚ the RTM Company would become responsible to all leaseholders for management including:

• Services
• Repairs
• Maintenance
• Insurance

Websters is experienced in advising in all areas of Right To Manage (RTM) companies including the formation and compliance (such as keeping the statutory records and preparation of statutory accounts).