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REGISTERED NUMBER: OC424889
Potential House LLP
Financial Statements
31 December 2023
Potential House LLP
Independent Auditor's Report to the Members of Potential House LLP
Year ended 31 December 2023
Opinion
We have audited the financial statements of Potential House LLP (the 'LLP') for the year ended 31 December 2023 which comprise the statement of income and retained earnings, statement of financial position, statement of cash flows and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice). In our opinion the financial statements: - give a true and fair view of the state of the LLP's affairs as at 31 December 2023 and of its loss for the year then ended; - have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; - have been prepared in accordance with the requirements of the Companies Act 2006 as applied to limited liability partnerships by the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the LLP in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the members' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the LLP's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the members with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The members are responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 as applied to limited liability partnerships requires us to report to you if, in our opinion: - adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or - the financial statements are not in agreement with the accounting records and returns; or - we have not received all the information and explanations we require for our audit.
Responsibilities of members
As explained more fully in the members' responsibilities statement, the members are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the members determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the members are responsible for assessing the LLP's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the members either intend to liquidate the LLP or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: The extent to which the audit was considered capable of detecting irregularities including fraud Our approach to identifying and assessing the risks of material mistatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows: - the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations; - we identified the laws and regulations applicable to the company through discussions with directors and other management, and from our commercial knowledge and experience of the sector; - we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operation of the company, including the Companies Act 2006, taxation legislation, data protection, employment, environmental and health and safety legislation; - we assessed the extent of non-compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence We assess the susceptibility of the company's financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by: - making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected, and alleged fraud; - considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations; and - understanding the design of the company's remuneration policies. To address the risk of fraud through management bias and override of controls, we: - performed analytical review procedures to identify any unusual or unexpected relationships; - tested journal entries to identify unusual transactions; - assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias; and - investigated the rationale behind significant or unusual transactions In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to: - agreeing the financial disclosures to underlying supporting documentation; - reading the minutes of meetings of those charged with governance; - enquiring of management as to actual or potential litigation and claims;and - reviewing correspondence with HMRC and the company's legal advisors. Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation. A further description of our responsibilities is available on the Financial Reporting Council's website at: www.frc.org.uk/Our-Work/Audit/Audit-and-assurance/Standards-and-guidance/Standards-and-guidanc e-for-auditors/Auditors-responsibilities-for-audit/Description-of-auditors-responsibilities-for-audit.aspx. This description forms part of our auditor's report. As part of an audit in accordance with ISAs (UK), we exercise professional judgment and maintain professional scepticism throughout the audit. We also: - Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. - Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control. - Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the members. - Conclude on the appropriateness of the members' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the LLP's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the LLP to cease to continue as a going concern. - Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Use of our report
This report is made solely to the LLP's members, as a body, in accordance with chapter 3 of part 16 of the Companies Act 2006 as applied to limited liability partnerships by the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008. Our audit work has been undertaken so that we might state to the LLP's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the LLP and the LLP's members as a body, for our audit work, for this report, or for the opinions we have formed.
Paul Mattei
(Senior Statutory Auditor)
For and on behalf of
Leaman Mattei
Chartered accountants & statutory auditor
Suite 1, First floor
1 Duchess Street
London
W1W 6AN
12 March 2024
Potential House LLP
Statement of Income and Retained Earnings
Year ended 31 December 2023
2023
2022
Note
£
£
Revenue
4
108,965
459,432
---------
---------
Gross profit
108,965
459,432
Operating expenses
33,320
38,658
---------
---------
Operating profit
5
75,645
420,774
Other expenses
6
119,082
65,898
---------
---------
(Loss)/profit for the financial year before members' remuneration and profit shares available for discretionary division among members
(43,437)
354,876
---------
---------
All the activities of the LLP are from continuing operations.
Potential House LLP
Statement of Financial Position
31 December 2023
2023
2022
Note
£
£
£
Fixed assets
Tangible assets
8
2,715,000
2,865,000
Current assets
Debtors
9
29,008
55,522
Cash at bank and in hand
81,913
53,589
---------
---------
110,921
109,111
Creditors: amounts falling due within one year
10
1,431,118
1,464,429
------------
------------
Net current liabilities
1,320,197
1,355,318
------------
------------
Total assets less current liabilities
1,394,803
1,509,682
Creditors: amounts falling due after more than one year
11
14,225
18,275
------------
------------
Net assets
1,380,578
1,491,407
------------
------------
Represented by:
Loans and other debts due to members
Other amounts
12
32,764
143,593
Members' other interests
Members' capital classified as equity
1,347,814
1,347,814
Other reserves, including the fair value reserve
------------
------------
1,380,578
1,491,407
------------
------------
Total members' interests
Loans and other debts due to members
12
32,764
143,593
Members' other interests
1,347,814
1,347,814
------------
------------
1,380,578
1,491,407
------------
------------
The members acknowledge their responsibilities for complying with the requirements of the Companies Act 2006 (as applied by The Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) regulations 2008) with respect to accounting records and the preparation of financial statements.
Potential House LLP
Statement of Financial Position (continued)
31 December 2023
These financial statements were approved by the members and authorised for issue on 12 March 2024 , and are signed on their behalf by:
Greenson Real Estate Limited Partnership
Designated Member
Registered number: OC424889
Potential House LLP
Statement of Cash Flows
Year ended 31 December 2023
2023
2022
£
£
Cash flows from operating activities
(Loss)/profit for the financial year
( 43,437)
354,876
Adjustments for:
Fair value adjustment of investment property
150,000
(205,000)
Other expenses
119,082
65,898
Accrued income
( 7,365)
( 7,070)
Changes in:
Trade and other debtors
26,514
( 22,463)
Trade and other creditors
( 8,246)
4,357
---------
---------
Cash generated from operations
236,548
190,598
Interest paid
( 119,082)
( 65,898)
---------
---------
Net cash from operating activities
117,466
124,700
---------
---------
Cash flows from financing activities
Repayment of capital or debt to members
(67,391)
(61,391)
Proceeds from borrowings
( 21,750)
( 108,750)
---------
---------
Net cash used in financing activities
( 89,141)
( 170,141)
---------
---------
Net increase/(decrease) in cash and cash equivalents
28,325
( 45,441)
Cash and cash equivalents at beginning of year
53,589
99,030
--------
--------
Cash and cash equivalents at end of year
81,914
53,589
--------
--------
Potential House LLP
Notes to the Financial Statements
Year ended 31 December 2023
1.
General information
The LLP is registered in England and Wales. The address of the registered office is C/o Leaman Mattei, Suite 1, First Floor, 1 Duchess Street, London, W1W 6AN.
2.
Statement of compliance
These financial statements have been prepared in compliance with FRS 102, 'The Financial Reporting Standard applicable in the UK and the Republic of Ireland', and the requirements of the Statement of Recommended Practice 'Accounting by Limited Liability Partnerships' issued in December 2018 (SORP 2018).
3.
Accounting policies
Basis of preparation
The financial statements have been prepared on the historical cost basis, as modified by the revaluation of certain financial assets and liabilities and investment properties measured at fair value through profit or loss.
The financial statements are prepared in sterling, which is the functional currency of the entity.
Judgements and key sources of estimation uncertainty
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported. These estimates and judgements are continually reviewed and are based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. (i) Significant judgements No critical accounting judgement was made by management in the process of applying the company's accounting policies that have a significant effect on the amounts recognised in the financial statements. (ii) Key sources of estimation uncertainty No critical sources of estimation uncertainty were made by management in the process of applying the company's accounting policies that have a significant effect on the amounts recognised in the financial statements.
Revenue recognition
Turnover is measured at the fair value of the consideration received or receivable and represents amounts receivable for rent, stated net of Value Added Tax. Revenue is recognised when the significant risks and rewards of ownership have transferred to the buyer, the amount of revenue can be measured reliably, it is probable that the associated economic benefits will flow to the entity, and the costs incurred or to be incurred in respect of the transactions can be measured reliably.
Members' participation rights
Members' participation rights are the rights of a member against the LLP that arise under the members' agreement (for example, in respect of amounts subscribed or otherwise contributed, remuneration and profits).
Members' participation rights in the earnings or assets of the LLP are analysed between those that are, from the LLP's perspective, either a financial liability or equity, in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, and the requirements of the Statement of Recommended Practice 'Accounting by Limited Liability Partnerships'. A member's participation right results in a liability unless the right to any payment is discretionary on the part of the LLP.
Amounts subscribed or otherwise contributed by members, for example members' capital, are classed as equity if the LLP has an unconditional right to refuse payment to members. If the LLP does not have such an unconditional right, such amounts are classified as liabilities.
Where profits are automatically divided as they arise, so the LLP does not have an unconditional right to refuse payment, the amounts arising that are due to members are in the nature of liabilities. They are therefore treated as an expense in the Income statement in the relevant year. To the extent that they remain unpaid at the year end, they are shown as liabilities in the Statement of financial position.
Conversely, where profits are divided only after a decision by the LLP or its representative, so that the LLP has an unconditional right to refuse payment, such profits are classed as an appropriation of equity rather than as an expense. They are therefore shown as a residual amount available for discretionary division among members in the income statement and are equity appropriations in the Statement of financial position.
Other amounts applied to members, for example remuneration paid under an employment contract and interest on capital balances, are treated in the same way as all other divisions of profits, as described above, according to whether the LLP has, in each case, an unconditional right to refuse payment.
All amounts due to members that are classified as liabilities are presented in the statement of financial position within 'Loans and other debts due to members' and are charged to the income statement within 'Members' remuneration charged as an expense'. Amounts due to members that are classified as equity are shown in the statement of financial position within 'Members' other interests'.
Tangible assets
Investment property is initially recorded at cost, which includes purchase price and any directly attributable expenditure. Investment property is revalued to its fair value at each reporting date and any changes in fair value are recognised in profit or loss.
Financial instruments
A financial asset or a financial liability is recognised only when the entity becomes a party to the contractual provisions of the instrument. Basic financial instruments are initially recognised at the transaction price, unless the arrangement constitutes a financing transaction, where it is recognised at the present value of the future payments discounted at a market rate of interest for a similar debt instrument. Debt instruments are subsequently measured at amortised cost. Financial assets that are measured at cost or amortised cost are reviewed for objective evidence of impairment at the end of each reporting date. If there is objective evidence of impairment, an impairment loss is recognised in profit or loss immediately. Any reversals of impairment are recognised in profit or loss immediately, to the extent that the reversal does not result in a carrying amount of the financial asset that exceeds what the carrying amount would have been had the impairment not previously been recognised.
4.
Revenue
Revenue arises from:
2023
2022
£
£
Rental income
258,965
254,432
Fair value adjustment of investment properties
(150,000)
205,000
---------
---------
108,965
459,432
---------
---------
The whole of the revenue is attributable to the principal activity of the LLP wholly undertaken in the United Kingdom.
5.
Operating profit
Operating profit or loss is stated after charging:
2023
2022
£
£
Impairment of trade debtors
600
----
----
6.
Other expenses
2023
2022
£
£
Bank interest
109,082
65,898
Other interest payable and similar charges
10,000
---------
--------
119,082
65,898
---------
--------
7.
Information in relation to members
2023
2022
No.
No.
Average number of members
2
2
----
----
8.
Tangible assets
Investment Property
Total
£
£
Cost or valuation
At 1 January 2023
2,865,000
2,865,000
Revaluations
( 150,000)
( 150,000)
------------
------------
At 31 December 2023
2,715,000
2,715,000
------------
------------
Depreciation
At 1 January 2023 and 31 December 2023
------------
------------
Carrying amount
At 31 December 2023
2,715,000
2,715,000
------------
------------
At 31 December 2022
2,865,000
2,865,000
------------
------------
The investment property is held at Fair Value as at 31 December 2023. The valuation is the opinion of Colliers International in accordance with the ‘RICS Valuation – Global Standards 2017 (Incorporating the IVSC International Valuation Standards)’ prepared by the Royal Institution of Chartered Surveyors (the “Red Book”).
9.
Debtors
2023
2022
£
£
Trade debtors
17,143
44,455
Prepayments and accrued income
5,800
10,467
Other debtors
6,065
600
--------
--------
29,008
55,522
--------
--------
10. Creditors: amounts falling due within one year
2023
2022
£
£
Bank loans and overdrafts
1,413,750
1,435,500
Trade creditors
3,925
Accruals and deferred income
13,977
21,342
Social security and other taxes
3,391
3,662
------------
------------
1,431,118
1,464,429
------------
------------
11. Creditors: amounts falling due after more than one year
2023
2022
£
£
Security deposits payable
14,225
18,275
--------
--------
12.
Loans and other debts due to members
2023
2022
£
£
Amounts owed to members in respect of profits
32,764
143,593
--------
---------
13.
Analysis of changes in net debt
At 1 Jan 2023
Cash flows
At 31 Dec 2023
£
£
£
Cash at bank and in hand
53,589
28,324
81,913
Debt due within one year
(1,435,500)
21,750
(1,413,750)
------------
--------
------------
Net debt (before members' debt)
(1,381,911)
50,074
(1,331,837)
------------
--------
------------
Loans and other debts due to members
Other amounts
(143,593)
110,829
(32,764)
------------
---------
------------
Net debt
( 1,525,504)
160,903
( 1,364,601)
------------
---------
------------