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bigduckontax
bigduckontax, Accountant
Category: Tax
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Hello, There is a Gov website which confirms that a flat

Customer Question

Hello,

There is a Gov website which confirms that a flat management company can be treated as 'dormant' for Corporation Tax if the Articles only permit property owners to be Directors. HMRC seems to phrase this as 'The Company's Articles of Association contain rules that only the persons having an interest in the property under management own shares in the Company'.

There is a fight going on at the moment where some property owners are trying to appoint a non owner as a Director of our RMC. We don't believe the Articles allow this but can you clarify the tax position on 'dormant' and explain the HMRC wording versus the Gov website (setting up and running a flat management company).
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

It is common for flat management companies to have shareholders with one share per flat. Whether a non owner can be appointed a Director rests entirely in the Company's Articles of Association. Most of these companies are classed as dormant because no liability to Corporation Tax (CT) arises as the companies do not trade, just hold the ring for the freehold of the estate. Providing they earn interest of under 1K from which tax has been deducted then HMRC make a concessional exemption from CT.
Customer: replied 3 years ago.

Thanks for your reply. Our Articles only allow for Residents to be Directors but there may some vestiges in Table A from the transitional phase with the developer.


 


Have you seen non owners as Directors on flat management companies?


 


Have you seen the Gov.uk page saying to be dormant you can only have owners as Directors?

Expert:  bigduckontax replied 3 years ago.
The restriction is either there in the Articles or it is not. You must examine the Articles to determine the exact position and also consult the Minutes of General Meetings to see if there are changes made to the original printed Articles.

I personally have not seen any Directors of FMCs who were not themselves owners, but that does not mean that in some cases there may be.

I cannot find that particular web page, but the one on CT makes it clear the circumstances in which such companies are treated as dormant. Remember there are thousands across the UK and even HMRC would jib at endless CT returns to no purpose.
Customer: replied 3 years ago.

Thanks. The Articles only provide for owners to be Directors but the other side are trying to reply on Table A of 1985 Companies Act. The Articles do rely on Table A except where excluded, varied or where they would be inconsistent with our Articles which is what we are relying on.

Expert:  bigduckontax replied 3 years ago.
But the Articles only provide for Directors to be owners so the residual parts which rely on on Table A are inapplicable. The Directors should reject any motion to appoint any Director who does not comply with the Articles.
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 3 years ago.

Thank you for your excellent support

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