Is a flat management company dormant?
By DormantFile · Updated 13 August 2026
Usually, but it isn't automatic — it depends on how service charges are actually held, and that's worth checking rather than assuming.
The underlying test is the one every UK company uses: a company is dormant during a period with no significant accounting transactions, under section 1169 of the Companies Act 2006. Any transaction that has to be entered in the company's own accounting records breaks dormancy, with no minimum amount — even a penny of bank interest counts.
What's specific to a flat management company, or an RTM company set up to take over management under the Right to Manage, is whose money is moving. Service charges paid by leaseholders aren't the company's to spend freely: under section 42 of the Landlord and Tenant Act 1987, they're held on trust for the leaseholders who paid them — the company holds the money as trustee, not as its own. That trust status is what keeps it out of the company's own accounting picture, whatever account it sits in; section 42 doesn't itself require a separate account (it lets the payee use a single fund or several). In practice, most FMCs and RTM companies keep service charges in a designated trust account anyway — good practice, and the cleanest way to show the money never becomes the company's own. Held and used only to pay the building's costs on the leaseholders' behalf, it's generally not treated as a transaction of the company itself, so it doesn't touch the company's own books and doesn't break dormancy.
That's why most flat management and RTM companies with no other activity are dormant year after year, even while real money moves to pay for insurance, cleaning and repairs elsewhere.
The test only holds if the money genuinely stays out of the company's own bank account. If service charges are paid into and out of the company's own account — rather than a properly separate trust or client account — those are the company's own transactions, and it isn't dormant. It's non-trading, and the right filing is micro-entity (FRS 105) accounts instead. Switching between dormant and micro-entity accounts covers how that works from one year to the next.
How service charges are held varies by building, managing agent and freeholder history — so check your own arrangement before assuming either way. If you're not sure, our free Am I dormant? checker is a good next step, and DormantFile files both dormant and micro-entity accounts, so getting the answer "wrong" at this stage isn't a dead end — see does DormantFile support companies limited by guarantee?
Read the full guide: How to file dormant accounts for a flat management or RTM company