Dormant company banking: keep the account from creating activity by accident

A dormant company can still need a bank account for future use or historic cash, but the company must be careful about transactions. Companies House and HMRC use related but not identical dormancy concepts, and receiving interest or incurring ordinary banking transactions can change the position.

Companies House dormancy depends on significant accounting transactions

Companies House says a company is dormant for its purposes if it has had no significant accounting transactions during the financial year. A significant accounting transaction is one that should be entered in the company's accounting records. Only a narrow list is disregarded, including subscriber share payments, certain Companies House filing fees and late-filing penalties.

That means a dormant company should not assume every bank movement is harmless. Ordinary receipts, payments, charges and interest are not part of the standard Companies House disregard list. If the bank account produces accounting entries, check with the accountant whether the company can still file dormant accounts for that period.

HMRC uses its own Corporation Tax dormancy test

GOV.UK says a company is usually dormant for Corporation Tax if it has stopped trading and has no other income, or if it is a new company that has not begun trading. HMRC explicitly includes receiving interest as an example of activity relevant to Corporation Tax dormancy.

This is an important banking distinction. A company can intend to do no business but still earn interest on cash left in an interest-bearing account. That income can mean the company is not dormant for Corporation Tax in the simple sense management expected. Companies House and HMRC dormancy should therefore be checked separately rather than treated as one identical status.

Avoid accidental interest or routine bank charges if preserving dormancy matters

An interest-bearing deposit can create income even if nobody at the company actively makes a transaction. Likewise, ordinary monthly bank fees create accounting entries. Because Companies House defines dormancy around significant accounting transactions and HMRC says receiving interest is activity for Corporation Tax purposes, a supposedly inactive bank account can create a reporting complication.

Before leaving cash in a dormant company, ask the accountant whether the account should be non-interest-bearing, whether fees are expected and how any unavoidable entries affect the company's status. Do not assume a £5 bank charge is irrelevant simply because the amount is small. The issue is the nature of the accounting transaction, not whether management considers it material commercially.

Decide whether keeping a bank account open solves a real future need

A newly incorporated company waiting several months before launch may want the account ready for trading. An old company being retained for possible future use may have less reason to keep a fee-charging account open. Compare the operational benefit with the risk of unnecessary transactions and administrative work.

If the company holds no cash and expects no activity, closing the account can simplify dormancy. If cash must remain in the company, document where it is held and how interest or fees are treated. Do not move money to a director personally merely to make the company bank account look inactive; ownership and accounting still need to be correct.

Dormant companies still have filing and record obligations

Companies House states that all limited companies must deliver accounts whether they trade or not. A small company that meets the dormancy conditions can file dormant accounts and may claim audit exemption, but it still needs annual filings such as accounts and the confirmation statement.

Keep bank statements, incorporation records and evidence of any permitted transactions with the dormant-company file. If HMRC has been told the company is dormant for Corporation Tax, preserve the effective date. The records should make it easy to show that no ordinary trading activity occurred during the dormant period.

Tell HMRC and rebuild ordinary banking controls when the company starts again

GOV.UK says a dormant company that starts trading again must tell HMRC and register for Corporation Tax again as required. The company will then prepare statutory accounts and Company Tax Returns for the active period according to the normal deadlines.

Before accepting the first customer payment, reactivate or replace the business account, update KYC information and test payment limits, cards and accounting feeds. If the bank classified the account as dormant or restricted after long inactivity, do not discover that on launch day. Treat the return to trading as a small onboarding project.

Also review old Direct Debits, standing orders and card subscriptions before restarting. A dormant company can inherit forgotten payment instructions from its earlier trading period. Removing obsolete instructions before new cash arrives reduces the chance that historic subscriptions or service contracts unexpectedly debit the revived account.