
Starting a new business? Get 40% off our accountancy services for 3 months! 😀
Despite what you may think, a dormant company isn’t simply a closed company. There are rules to owning a dormant company, which you must meet if you wish your company to be classified as dormant.
So, what is a dormant company, and what reasons are there for becoming dormant? We delve into this and other frequently asked questions below.
There are two definitions of ‘dormant’ according to HMRC; one for Corporation Tax and one for Companies House.
A dormant company for Corporation Tax is one which is:
A dormant company for Companies House is a company which is registered with Companies House, but which has had ‘no significant accounting transactions’ during its financial year. A ‘significant accounting transaction’ may be defined by any transaction which should be entered in a company’s accounting records.
For a company to be dormant for Companies House, its transactions must be limited to:
There are certain exceptions to these such as some financial companies who must file their full accounts regardless of their company status.
There a many reasons a company may become dormant either for Corporation Tax or for Companies House. This might include:
One of the main benefits is that whichever description a dormant company falls under, you will have fewer filing responsibilities, reducing the statutory burden on your company.
A dormant company is also exempt from paying Corporation Tax, as long as it’s dormant according to the description above. However, you must pay any outstanding tax liabilities before you can become dormant.
A company might always be dormant from the moment it’s set up, or it may become dormant later. Either way, it is important to continue managing it in the correct way.
Each dormant company must still meet certain filing requirements.
As a dormant company you will still need to file annual accounts and a confirmation statement to Companies House. You must do this whether your company is dormant for Corporation Tax or for Companies House.
To make an active company dormant, you must inform HMRC that your company is dormant as soon as possible. To inform HMRC, you can send a letter or contact them by phone. You must do so within three months of your company becoming dormant. You won’t need to inform Companies House that your company is dormant until you need to file your annual accounts.
If your company had employees, you will be required to pay any remaining wages and close your existing PAYE scheme.
You must also deregister for VAT within 30 days of becoming dormant. If the company is only to be dormant temporarily, and you plan to begin trading again in the future, continue sending empty VAT returns while your company is dormant.
As dormant companies cannot spend or receive any money without becoming active for Corporation Tax, it is best to close business bank accounts to ensure no income is received.
If you have a dormant company and wish to become active, you must inform HMRC within three months of the company becoming active. For companies which have been active in the past, this is as simple as signing into your HMRC account and changing the status of the company to ‘active’ for Corporation Tax.
If the company has never traded you will need to register for Corporation Tax.
You may also need to register for VAT if you expect your turnover to be over the VAT threshold.
You do not need to inform Companies House when your company becomes active again, as this will be clear when you submit your annual accounts.
Do you need more advice on managing your dormant company? Get in touch with the our friendly team on 020 3355 4047 to see how TAP can help
Subscribe to our newsletter to get accounting tips like this right to your inbox
When you set up in business as a contractor you might either work as a sole trader or as a limited company….
Read MoreSmall Business Saturday started in the US in 2010, on the first Saturday following Thanksgiving. It aims to encourage shoppers to consider…
Read MoreArchitecture is a highly diverse sector when it comes to tax. It’s partly down to the type of businesses that carry out…
Read MoreThe number of monthly transactions you have entered based on your turnover seem high. A transaction is one bookkeeping entry such as a sale, purchase, payment or receipt. Are you sure this is correct?
Please contact our sales team if you’re unsure
It is unlikely you will need this service, unless you are voluntarily registered for VAT.
Are you sure this is correct?
Call us on 020 3355 4047 if you’re not sure.
You only need this service if you want us to complete the bookkeeping on your behalf.
Would you prefer to complete your own bookkeeping?
Call us on 020 3355 4047 if you’re not sure.