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It is not a legal requirement for any limited company to have a business bank account, but it is highly advisable if your company is trading. Non-trading (dormant) companies do not require a bank account because no money is being spent or generated by the business; therefore, no financial transactions are taking place that require entry in the company accounts.

If your company was previously trading and subsequently becomes dormant, it would be wise to close down any business bank account, particularly if it is an interest-earning account. Your company’s dormant status could be affected by something as simple as earning a few pounds of interest in the business bank account and you would then be liable to file a full set of accounts. To avoid any such issue, the safest and easiest option is simply not to open an account until your company is active, or close any existing accounts associated with the business if your company was previously active.

If your company is dormant from the date of incorporation it is not considered active for corporation tax purposes and you should carry out the following steps:

  • Inform your local Corporation Tax Office that your new company is dormant. This should be done in writing and as soon as possible after company registration. The details of your local CTO can be found on any correspondence from HMRC that has been sent to your registered office address.
  • File an Annual Return with Companies House every year on the anniversary of the date of company formation.
  • Submit dormant accounts to Companies House each year.
  • Inform HMRC within 3 months of engaging in any business activity – your company will be active and liable for Corporation Tax from the moment it begins trading.
  • If your dormant company becomes active, you will inform Companies House after the fact by submitting a full set of annual accounts within 9 months of your company’s Accounting Reference Date.
  • If your company becomes active you should register for VAT if you anticipate your turnover will exceed £79,000 (2013-14).

If your company was previously active and becomes dormant, you should ensure all of the following steps are carried out:

  • Ensure any outstanding invoices are paid and up-to-date before your company becomes dormant.
  • Contact your local Corporation Tax Office in writing, informing them that your company has become dormant. They will send a ‘Notice to deliver a Company Tax Return’ to your registered office address and this should be completed and filed, along with any tax owing, for the period of activity before your company became dormant.
  • Pay any wages due and close the payroll
  • Cancel VAT registration (if applicable) with HMRC and pay any VAT due.
  • Pay all outstanding bills and cancel all business contracts, such as telephone and Internet contracts, insurance, leases, utilities etc.
  • Submit dormant accounts to Companies House within 9 months of your company’s usual Accounting Reference Date.
  • Continue to file an Annual Return with Companies House each year.