Does a UK Company With Only Bank Charges Count as Dormant?
A UK limited company that has stopped trading may still incur monthly bank charges, account maintenance fees or transaction fees. These costs can seem insignificant, especially if the company has no customers, makes no sales and conducts no other business activity. However, even small bank charges can affect whether a company qualifies as dormant for Companies House purposes.
In most cases, a UK limited company that records bank charges during its financial year cannot file dormant accounts with Companies House for that period. Bank charges are generally accounting transactions that must be recorded in the company's books, and they are not among the transactions specifically disregarded under the statutory rules for dormant companies.
The distinction matters because dormant companies can file simpler accounts, while companies that are not dormant must prepare accounts appropriate to their circumstances. Filing the wrong type of accounts can create compliance problems for directors. This guide explains how bank charges affect dormant status, what happens if a company has no income or trading activity, and what directors should do to remain compliant.
What Does Dormant Mean for a UK Limited Company?
A company is considered dormant by Companies House when it has had no significant accounting transactions during the relevant financial year. Under section 1169 of the Companies Act 2006, a significant accounting transaction is one that must be entered into the company's accounting records under section 386.
This means dormancy is not determined solely by whether a business is trading. A company can have no customers, employees, sales or active business operations and still fail the Companies House dormancy test because it has recorded certain financial transactions. For example, consider a limited company that was set up to provide consulting services but never found a client. The director decides to pause the business, but the company bank account remains open and the bank deducts a £12 monthly account fee.
Although the company has earned no revenue, the bank fees are still transactions that generally need to be recorded in its accounting records. The company may therefore be unable to file dormant accounts for that financial year. The key question is not simply whether the company traded. It is whether any transactions occurred that prevent it from meeting the statutory dormancy test.
Do Bank Charges Count as Significant Accounting Transactions?
Yes, ordinary bank charges generally count as significant accounting transactions for Companies House dormancy purposes. Bank charges are business expenses. If a bank deducts an account maintenance fee, service charge or transaction fee from a company's account, the company will generally need to record that expense in its accounting records.
Unlike certain specified transactions, ordinary bank charges are not excluded from the dormancy test. The Companies Act 2006 and Companies House guidance identify particular transactions that can be disregarded when determining dormancy. These include:
- Payments for shares taken by subscribers when the company is incorporated.
- Certain Companies House fees, including fees for registering a confirmation statement or changing the company name.
- Penalties for filing accounts late.
Ordinary bank charges are not on this list. Consequently, even a small bank fee can affect a company's eligibility to file dormant accounts. The amount involved does not automatically make the transaction insignificant for this purpose.
Examples of bank charges that can affect dormancy
The following examples illustrate the distinction:
| Transaction | Likely effect on Companies House dormancy |
|---|---|
| Monthly business bank account fee | Generally prevents dormant status for the period |
| Bank transaction or service charge | Generally prevents dormant status for the period |
| Fee for maintaining a business current account | Generally prevents dormant status for the period |
| Bank interest credited to the account | Generally prevents dormant status for the period |
| Companies House confirmation statement filing fee | Specifically disregarded under the statutory rules |
| Companies House late accounts penalty | Specifically disregarded under the statutory rules |
The treatment of an unusual transaction may depend on its precise nature. Directors should not assume that every bank-related entry is automatically excluded or that a small amount can be ignored.
What If the Company Has No Income, Sales or Business Activity?
A company can be inactive commercially without qualifying as dormant for Companies House purposes. This is one of the most common sources of confusion among directors of small businesses and newly incorporated companies. Imagine a company that has stopped trading and has no customers, employees or sales. Its only financial activity is a £10 monthly bank charge.
At the end of the year, the company has incurred £120 in bank fees but generated no income. From a commercial perspective, the company has not been trading. From an accounting perspective, however, it has incurred expenses that generally need to be recorded. The company would therefore usually need to prepare and file accounts that reflect those transactions rather than claiming it was dormant throughout the year.
This does not necessarily mean the company must prepare the most detailed form of accounts. Depending on its circumstances, it may qualify for the small companies regime or micro-entity reporting arrangements. However, it should not assume that it qualifies for dormant accounts simply because it has not traded.
Does the amount of the bank charge matter?
Generally, no. The Companies House dormancy test is not based on whether the transaction is large enough to be commercially important. A £5 account fee can still be a transaction that must be entered into the accounting records. A director should not decide that a charge is too small to count merely because it has little financial impact. The correct approach is to identify the transaction, establish how it should be recorded and determine whether it falls within a specific statutory exception.
Can a Company Be Dormant if Its Bank Account Remains Open?
Yes. Having an open bank account does not, by itself, prevent a company from being dormant. A company may retain a bank account while it is inactive. If no relevant transactions occur during the accounting period, the existence of the account alone does not necessarily prevent dormant status. The difficulty arises when the account continues to generate activity. For example:
- Account remains open, with no transactions: The company may still qualify as dormant, subject to the other relevant facts.
- Account remains open and the bank deducts monthly fees: The company will generally not qualify as dormant for Companies House purposes for that period.
- Account receives interest: The interest is a financial transaction and generally affects dormancy.
- Account pays for subscriptions or business services: Those payments are transactions that normally need to be recorded and can prevent dormant status.
The practical lesson is that directors should check the actual bank statement rather than relying on the assumption that an inactive business must have an inactive account. If the company has genuinely stopped operating and the account is no longer needed, directors may consider whether closing it is appropriate. They should first address any remaining liabilities, outstanding payments and other obligations.
Closing a bank account does not remove transactions that have already occurred during the financial year. If bank charges were recorded earlier in the period, the company may still need to file non-dormant accounts for that year.
What Is the Difference Between Dormancy for Companies House and HMRC?
Companies House and HM Revenue & Customs (HMRC) use different tests for dormancy. A company may be inactive for tax purposes but not qualify to file dormant accounts at Companies House. Understanding this distinction is particularly important when a company has stopped trading but continues to incur small administrative costs.
Dormancy for Companies House
Companies House focuses on whether the company has had significant accounting transactions during the financial year. Ordinary bank charges generally count because they are transactions that must be recorded in the company's accounting records. If the company has incurred these charges, directors should normally prepare accounts that reflect the activity rather than submit dormant accounts.
Dormancy for Corporation Tax
HMRC generally considers whether a company is active for Corporation Tax purposes, including whether it is trading or receiving income. A company that has stopped trading and has no other income may be eligible to be treated as dormant for Corporation Tax purposes. However, its position depends on its activities and circumstances. Bank charges alone do not necessarily mean a company has resumed trading. For example, an inactive company might continue to incur a bank fee while it waits to restart operations or complete its closure.
Nevertheless, the presence of bank charges does not automatically settle the company's tax position. Directors should consider whether there is any other business activity or income and follow HMRC's instructions. If HMRC has issued a notice requiring the company to submit a Company Tax Return, the company generally must file it even if it believes it is dormant, unless HMRC withdraws the notice or confirms otherwise.
A practical comparison
| Question | Companies House | HMRC |
|---|---|---|
| Main consideration | Significant accounting transactions | Business activity and Corporation Tax position |
| Do ordinary bank charges matter? | Generally, yes | Not automatically decisive |
| Can a company be inactive but not dormant? | Yes | Yes, depending on its tax circumstances |
| Are annual filing obligations automatically removed? | No | A Company Tax Return may still be required if HMRC has issued a notice |
Directors should assess each obligation separately rather than treating dormancy as a single status that applies identically across government.
What Accounts Should You File if Your Only Transactions Are Bank Charges?
If the company has incurred bank charges during its financial year, it will generally need to file accounts that reflect those transactions instead of dormant accounts. The exact format depends on the company's size, eligibility for reporting exemptions and other circumstances.
For an eligible small company or micro-entity, the accounts filed at Companies House may be simpler than those required of a larger company. However, the accounts must still be prepared on the correct basis. The process typically involves the following steps.
1. Obtain the company's bank statements
Review the complete financial year, not just the current account balance. Look for monthly fees, interest, transaction charges, payments to suppliers and any other entries. A company may have no sales but still have financial activity that needs to be accounted for.
2. Record the transactions correctly
Bank charges will generally be recorded as expenses, with the corresponding effect on the company's bank balance. If the company has no revenue, these expenses may contribute to a loss for the period. The precise accounting treatment depends on the company's circumstances and the applicable accounting framework.
3. Review the company's reporting eligibility
Determine whether the company qualifies to prepare and file accounts under the small companies regime or as a micro-entity. Eligibility depends on statutory requirements, not merely on whether the company has little activity or low expenses.
4. File by the applicable deadline
A private limited company will generally need to file its annual accounts within nine months of the end of its financial year after the first accounting period, subject to the applicable rules. Different deadlines can apply to first accounts and public companies. Importantly, filing dormant accounts does not provide an extended deadline. Dormant and non-dormant accounts are subject to the relevant filing deadlines and late filing penalties.
What Happens if You File Dormant Accounts Despite Having Bank Charges?
Submitting dormant accounts when the company has transactions that prevent dormant status can result in inaccurate statutory filings. The correct response depends on the company's circumstances and whether the accounts have already been submitted.
Directors should not assume that Companies House accepting a filing means every accounting detail has been assessed or that the company necessarily met the dormancy criteria. If you have already filed dormant accounts but later discover that the company incurred bank charges during the period, consider the following steps:
- Review the accounting period. Confirm when the charges occurred and whether they fall within the financial year covered by the dormant accounts.
- Check the transaction details. Establish whether the entries are ordinary bank charges or transactions covered by a specific statutory exception.
- Seek appropriate accounting advice. Determine whether corrected accounts are needed and what filing procedure applies.
- Address any HMRC obligations separately. Companies House filings do not automatically satisfy Corporation Tax reporting requirements.
- Keep supporting records. Retain bank statements, accounting records and relevant correspondence.
Directors are responsible for ensuring that their company's accounts meet the applicable requirements. If there is uncertainty about correcting a previous filing, it is sensible to obtain professional advice rather than submit another set of accounts without understanding the correct procedure.
How Can You Avoid Bank Charges if Your Company Is Inactive?
If you want your company to remain eligible for dormant accounts, reducing unnecessary financial activity may help. However, you should not focus only on avoiding fees; you must also consider the company's wider legal and financial obligations. Possible practical steps include:
- Ask the bank whether it offers an account with no maintenance fees.
- Review whether the business bank account is still necessary.
- Consider closing the account if the company no longer needs it and doing so is appropriate.
- Cancel unused subscriptions and recurring payments.
- Check for interest, fees or other entries before the end of each accounting period.
These steps may reduce future activity, but they cannot retrospectively remove transactions already recorded during the current financial year. If a company has incurred bank charges during one year but has no significant accounting transactions in the next, it may be able to qualify as dormant for the later period, assuming all other requirements are met. A company does not necessarily need to remain non-dormant forever simply because it incurred bank charges in a previous year. Dormancy is assessed for the relevant period.
Frequently Asked Questions
1. Can I file dormant accounts if my company only paid £10 in bank charges?
Generally, no. The amount does not determine whether the transaction counts. Ordinary bank charges must generally be recorded in the company's accounting records and are not among the specified exceptions to the Companies House dormancy test.
2. Does a bank charge mean my company has started trading again?
Not necessarily. A bank charge can affect Companies House dormancy without proving that the company has resumed trading. Companies House and HMRC apply different tests, so the transaction's effect on tax status must be considered separately.
3. Can my company remain dormant if its bank account is open?
Yes. An open account alone does not automatically prevent dormancy. However, regular bank fees, interest or other transactions can affect whether the company qualifies as dormant for Companies House purposes.
4. Do bank interest payments affect dormant status?
Generally, yes. Interest credited to a company bank account is a financial transaction that normally needs to be recorded. It is not one of the specific transactions disregarded under the Companies House dormancy rules.
5. Can HMRC still consider my company dormant if it pays bank charges?
Potentially. Bank charges alone do not necessarily establish that a company is active for Corporation Tax purposes. HMRC's assessment focuses on the company's business activity and tax position. You must still comply with any requirement to file a Company Tax Return.
6. Do I still need to file a confirmation statement if my company is dormant?
Yes. Dormant companies generally must continue to file a confirmation statement and annual accounts with Companies House. Dormant status does not remove these obligations.
7. Can I close my company bank account to make the company dormant?
Closing the account may prevent future bank charges, but it does not erase transactions that have already occurred. If charges were recorded during the current financial year, the company may still need to file non-dormant accounts for that period.
8. What if I have already filed dormant accounts and later discover bank charges?
Review the period covered by the accounts and establish whether the charges affect the company's eligibility for dormant status. You may need to correct the filing. Consider seeking professional advice before taking action.
Conclusion
A UK company with only bank charges will generally not qualify as dormant for Companies House purposes during the period in which those charges are recorded. The reason is straightforward: ordinary bank charges are accounting transactions, and they are not among the specific transactions that the law allows companies to disregard when determining dormancy.
The absence of sales, customers or active trading does not automatically make a company dormant. Directors must review the company's actual financial activity and distinguish Companies House requirements from HMRC's separate Corporation Tax rules. If your company has stopped trading, check its bank statements, account for any remaining charges and determine which type of accounts it should file. If you want the company to qualify as dormant in a future financial year, reducing unnecessary transactions may help, provided all the relevant conditions are met.
For founders managing a UK company from abroad or maintaining a business between trading periods, understanding these rules can prevent avoidable filing errors. IncorpUK, a UK company formation and management platform for global founders, operates in a compliance environment where these distinctions matter: inactivity does not remove a director's responsibility to file the correct accounts on time.