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A guide to helping you understand dormant business bank accounts
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A guide to bank accounts for dormant companies
If your company is not currently trading, it is classed as dormant and is inactive in terms of its tax liabilities. There are various aspects which you need to consider if you own a dormant company, including business bank accounts. To help you understand the intricacies, we have created this guide to dormant company bank accounts.
Do dormant companies need a business bank account?
There are restrictions on spending and receiving money if you run a formant company, otherwise the business will become active. If you hold a business bank account, a single transaction should as paying bank charges will forfeit its dormant status. If you are looking to keep the business dormant, the easiest way is to not hold a business account.
As the dormant status is temporary, many businesses are concerned about the ease of closing and then opening an account. However, if you do decide to begin trading, it is very easy to open a new business account. If there are any incidental costs while the business is dormant, these can be paid through your personal account.
As soon as the business becomes active, legally you will be required to open a business account. This is because you are a separate legal entity to your business, so your finances need to be separated.
What is a dormant limited company?
If your business has no significant accounting transactions during the financial year, it will be a dormant company. If a business is inactive, many of the usual business banking activities will not be occurring, including:
Paying invoices
Operating a payroll
Receiving payments from customers
Paying bank charges and fees
If a business begins any type of trading activity, it will instantly lose its dormant classification and become an active company.
However, there are some transactions which are not included within this rule:
Payment of shares to the first shareholders
Payments made to Companies House
A dormant company is often inactive for a temporary period of time, although there is no time limit. Although inactive, there are still obligations required in terms of reporting and filing to HMRC and Companies House.
How to find the best dormant company bank account
If your business was dormant and is becoming active, you will need to find and open a business account. Taking the time to find the best bank account will ensure your business benefits from the best deal available. There are some accounts which are ideal for small businesses while others are designed for large corporations. To find the ideal business account for your dormant company, you need to consider which features you will require.
For example, in the past you may have held a traditional account with a high-street bank. However, today there are a growing number of challenger banks, which can provide alternative online banks. These banks provide the facilities required, at a lower cost, with the ability to pay cash in via the Post Office.
The cost of an account is always important; however many banks provide an introductory free period to new customers. Although, there are some banks which provide bank accounts with no monthly fees. To find the best deal you need to consider the monthly cost and the charges for your most regular transactions. Unlike personal accounts, there are fees associated with using accounts.
To help you compare costs and key features, we have developed an innovate comparison service. By using our quick filters, you will be able to create a list of potential accounts which match your requirements. It is possible to quickly compare the monthly charges and key features of comparable bank accounts. You will then be able to use the link to the bank’s website, to complete or begin the application form.