Residents’ management companies and dormant accounts: when they apply and what leaseholders still expect to see
Many residents’ management companies (RMCs) and right to manage (RTM) companies can file dormant accounts if they have no significant transactions of their own. Service charge money held on trust does not automatically make the company active. Ground rent, interest on company-owned funds or bank charges can affect dormancy. A company that is not dormant must prepare the appropriate statutory accounts; micro-entity accounts are available only if it qualifies. Neither filing replaces clear service charge reporting for leaseholders.
The essential distinction is between money belonging to the company and money it administers on trust.
When a company counts as dormant
Under the Companies Act 2006, a company is dormant for an accounting period without significant accounting transactions. Exceptions include certain Companies House fees, late accounts filing penalties and the initial issue of subscriber shares. Even a small charge on the company’s own account generally counts as a transaction.
Section 42 of the Landlord and Tenant Act 1987 protects qualifying service charges on trust. They are not automatically company income, even when the RMC or RTM administers them. What matters is the legal ownership of the funds and the company’s own transactions, not merely the name on a bank account.
| Situation | Dormant? |
|---|---|
| Service charges held in a designated trust account, with no company transactions | Usually yes |
| Service charges passing through an ordinary company account | Investigate: poor separation does not by itself establish the accounting treatment |
| Company receives ground rent as its own income | No |
| Interest earned on the company’s own funds | No |
| Company buys the freehold during the year | No for that period |
| Only Companies House fees exempted by statute are paid | Usually yes |
What dormant does not switch off
A dormant limited company must still submit annual accounts to Companies House, normally within nine months of its financial year end, and file an annual confirmation statement. Directors and people with significant control must meet identity verification requirements. The transitional arrangements began on 18 November 2025 and run over 12 months; individual deadlines depend on the relevant role and confirmation statement. Dormant companies may qualify for audit exemption, but directors retain their filing responsibilities. Companies House guidance on filing annual accounts explains the requirements.
Companies House confirmed on 23 October 2026 that planned mandatory profit and loss filings for small and micro companies have been paused. However, software-only iXBRL accounts filing is still scheduled for April 2028. Review our checklist for property companies on profit and loss filing when planning the transition.
Need Expert Accounting Advice?
If you are unsure about tax, bookkeeping, payroll, property accounts or business finances, speak to the team at FHP Accounting for clear, practical guidance.
What leaseholders still expect to see
Dormant accounts may show little about a building’s finances. Separate service charge accounts should explain contributions, expenditure, amounts owed and reserve funds, following the lease and relevant professional guidance. Our guide to service charge accounting covers the records involved, and what year-end statements need to include describes the reporting process.
Under sections 21 and 22 of the Landlord and Tenant Act 1985, leaseholders can request a summary of relevant costs and then inspect supporting documents within the statutory procedures. Lease terms may require further annual information. Our RICS and ARMA best practice guide explains the wider approach to transparency.
Consider an 18-flat block with an annual service charge budget of £54,000. If its board has only dormant statutory accounts and cannot provide service charge statements, residents cannot see how their money was spent. Bank statements may need reconciling across previous years. A designated trust account improves safeguards, but historic transactions and filing eligibility still require review.
Getting the structure right
Three habits make the distinction easier to manage.
- Hold service charge money in designated trust or client accounts, separate from the company’s own funds.
- Prepare service charge statements annually in line with the lease and applicable guidance, regardless of Companies House filing status.
- Check company-owned income, expenses and assets before deciding whether dormant accounts are appropriate.
Directors should read our guide to RTM annual accounts. Commercial buildings may have different arrangements, covered in our commercial property management accounting guide and summary of the updated RICS service charge code.
FAQs
Do dormant companies have to file accounts?
Yes. Dormant limited companies must file annual accounts and confirmation statements, even if they are not trading. The simplified dormant accounts format is available where eligibility conditions are met.
Is a residents’ management company automatically dormant?
No. Service charges held on trust do not necessarily count as company income, but the company may also have transactions of its own. Review bank movements, ownership of funds and any other income or expenses.
What counts as a significant accounting transaction?
Generally, a transaction the company must record in its accounting records. Certain statutory Companies House fees, late accounts filing penalties and subscriber share payments are disregarded.
Get your accounts structured properly
If you are unsure whether dormant filing is appropriate, FHP Accounting can review your position. We provide residential property management accounting, service charge accounting, annual statutory accounts, company secretarial services and bookkeeping. We also support managing agents working with RMC and RTM clients. Get in touch to discuss your filing and reporting requirements.
I lead FHP Accounting, an accountancy practice specialising in Commercial and Residential Property Accounting. Our goal is to make the administration of running property portfolios easier for landlords, managers, and investors — allowing you to focus on what you do best, while we take care of everything behind the scenes.
Need Expert Accounting Advice?
If you are unsure about tax, bookkeeping, payroll, property accounts or business finances, speak to the team at FHP Accounting for clear, practical guidance.
