Can a dormant company use the micro-entity accounting rules?

Companies Act 2006, section 1169(1) and (2): a company is dormant during any period in which it has no significant accounting transaction, meaning a transaction required by section 386 to be entered in its accounting records. Section 1169(3) disregards: any transaction arising from the taking of shares by a subscriber to the memorandum in connection with the formation of the company; and payment of a fee to the registrar on a change of name or on re-registration, a penalty under section 453 for failure to file accounts, or a fee for registering a confirmation statement. Section 386(2) and (3): records must be sufficient to show and explain the company's transactions, and must contain day-to-day entries of all sums of money received and expended and a record of assets and liabilities.

Section 1169 does not list interest among the disregarded transactions. Read with section 386(3)(a), interest received is a sum of money received that must be entered, so it is a significant accounting transaction.

SourcesThe law

FRS 105 applies to the financial statements of a micro-entity that chooses the micro-entities regime, and the regime is optional. A micro-entity is a company meeting section 384A of the Companies Act 2006 and not prevented by section 384B from applying the micro-entity provisions. Section 384B lists the exclusions; being dormant is not one of them. FRS 100 paragraph 4: an entity not eligible for FRS 105, or choosing not to apply it, must use FRS 102, adopted IFRS or, for the individual accounts of a qualifying entity, FRS 101.

FRS 105 paragraph 28.10(g), "Dormant micro-entities": a company within the Act's definition of a dormant company may elect to retain its accounting policies for reported assets, liabilities and equity at the date of transition to FRS 105 until there is any change to those balances or the micro-entity undertakes any new transactions that would cause the company to cease to be dormant within the Act's definition. It is one of the optional exemptions for a company's first FRS 105 financial statements. Paragraph 28.12: exemptions applied at the date of transition may continue in later accounts until the related assets and liabilities are derecognised. Without the exemption, paragraph 28.7 requires the opening statement of financial position to recognise, exclude, reclassify and measure items under FRS 105.

The 28.10(g) text quoted is from the September 2024 edition, which already includes the Periodic Review 2024 amendments. The February 2026 amendment to FRS 105 changed paragraphs 1.10 and 10.13, not the dormant exemption. The March 2025 threshold amendment changed the size limits in FRS 105 Appendix III, not the dormant exemption.

SourcesThe law·FRC

Companies House (Life of a company, part 1): unaudited dormant accounts must contain a balance sheet with statements above the director's signature and printed name to the effect that "the company was dormant throughout the accounting period", any previous year's figures for comparison, and certain notes to the balance sheet. Companies Act 2006, section 414(3)(a): individual accounts prepared under the micro-entity provisions must contain, in a prominent position above the signature on the balance sheet, a statement to that effect. FRS 105 paragraph 3.14 repeats this.

For paper filing, Companies House says these statements must appear above the director's signature and printed name: "For the year ending (dd/mm/yyyy) the company was entitled to exemption from audit under section 480 of the Companies Act 2006 relating to dormant companies"; "The members have not required the company to obtain an audit of its accounts for the year in question in accordance with section 476"; and "The directors acknowledge their responsibilities for complying with the requirements of the Act with respect to accounting records and the preparation of accounts". A private company that qualifies as small should also state: "These accounts have been prepared in accordance with the provisions applicable to companies subject to the small companies regime". Section 415(1A): a micro-entity need not prepare a directors' report.

The micro-entity balance sheet uses the Section C formats. Format 1 includes the headings "Called up share capital not paid", "Current assets" and "Capital and reserves". SI 2008/409 gives the Section C headings with no sub-headings and no note on share capital or cash.

SourcesThe law·Companies House·FRC

Companies Act 2006, section 480(1) and (2): a company is exempt from audit for a financial year if it has been dormant since its formation, or it has been dormant since the end of the previous financial year and, for its individual accounts, is entitled to prepare accounts under the small companies regime (or would be, but for being a public company or a member of an ineligible group) and is not required to prepare group accounts. Section 480(3): this is subject to section 475(2) and (3) (statements in the balance sheet), section 476 (members' right to require an audit) and section 481. Section 481: a company is not entitled to the exemption if at any time in the year it was a traded company, an authorised insurance company, a banking company, an e-money issuer, a MiFID investment firm or a UCITS management company, or carried on insurance market activity.

SourcesThe law

Companies House's collection page lists the filing options by type of accounts: "Dormant | Software, WebFiling (if not previously traded)" and "Micro entity | Software, WebFiling", and says "For now, you can also file your company accounts online or send paper accounts to Companies House by post." Life of a company part 1, 7.2: the online services file "dormant company accounts for companies that have never traded" and "micro-entity accounts"; 13.4: form AA02 "is also not suitable for companies that became dormant after trading"; such a company prepares its dormant accounts another way. 7.3: from 1 April 2028 paper filers "will need to use commercial software"; the copy of the balance sheet must be signed by a director and show the director's printed name, or Companies House will reject the accounts. The GOV.UK software finder lists software for "unaudited dormant accounts" and, separately, for micro-entity accounts. The online service asks "Which type of accounts have you prepared?" and offers "Micro-entity accounts" and "Dormant company accounts" as separate choices.

Companies Act 2006, section 414(3): if the accounts are prepared under the small companies regime, the balance sheet must contain, above the signature, (a) for individual accounts prepared in accordance with the micro-entity provisions, a statement to that effect, or (b) for accounts not so prepared, a statement that they have been prepared in accordance with the provisions applicable to companies subject to the small companies regime. Form AA02 (version 6.0, 03/26) prints the section 480 dormant audit exemption statements and "These accounts have been prepared in accordance with the provisions applicable to companies subject to the small companies' regime"; it has no micro-entity statement. Its template is "only suitable for those companies limited by shares which have never traded and where the only transaction entered into the accounting records of the company is the issue of subscriber shares". GOV.UK says the same of the paper form. Companies House's WebFiling help lists "Dormant Company Accounts (DCA) AA02 suitable for companies limited by shares or limited by guarantee that have never traded" and "Audit exempt Micro entity accounts". Its micro-entity balance sheet help says "All four statements must be accepted before the accounts are submitted", without listing them. The micro-entities regime is optional; a company not applying FRS 105 must use another standard, such as FRS 102.

SourcesThe law·Companies House·FRC