A 'dormant' company has varying statutory obligations for corporate taxes and for Companies House. This guide reviews the procedures of dormant companies and associations for Corporation Tax purposes.
When is a company or an association considered as being 'dormant' in UK?
To be 'dormant', it must not be 'trading' (doing business) and must not have any other sources of income (e.g. investments).
Note: Dormant companies must still register with Companies House.
But, unlike a trading company, a dormant company would not be carrying out any day-to-day business activities.
Because it does not receive any form of income, HM Revenue and Customs would consider it as 'inactive' for Corporation Tax purposes.
A company can be in dormant status from the original date of its incorporation. It can also become dormant after operating in a period of business activity. There are several valid reasons for making companies and associations dormant, such as:
A company can remain in a dormant state for any length of time. But, you must inform the local corporation tax office without delay. You must also maintain several statutory obligations for Companies House, including:
As a rule, a company would be dormant for Corporation Tax purposes if any of these circumstances apply:
Note: Be aware of what counts as dormant for Corporation Tax. Trading can include advertising, buying, selling, renting property, employing someone, or receiving interest.
If HM Revenue and Customs thinks your company is dormant they may send you a letter that informs you:
You can inform HMRC when you think your company is dormant for Corporation Tax. It must have stopped trading and have no other sources of income.
You can tell HMRC that your company is dormant over the phone or by postal methods if you did not get a 'notice to deliver a Company Tax Return'.
You would still need to file your Company Tax Return online. Doing so shows HM Revenue and Customs that the company is dormant. HMRC will not send another 'notice' once they make the company dormant.
Once you tell HMRC the company is dormant there is no need to pay Corporation Tax or file another Company Tax Return.
But, you do need to file annual accounts and file a confirmation statement (annual return). The procedure would depend on whether the company is dormant for Companies House (see below).
Note: A different section explains the process for restarting a non-trading or dormant company in United Kingdom.
You will need to 'deregister' or cancel VAT registration within 30 days of the company becoming dormant if it is registered for VAT. Send 'nil' (empty) VAT returns during the period that the company is dormant if you intend to restart trading at a later date.
If the company employs people you should close the PAYE scheme. You should stop being an employer if you do not have plans to restart trading during the tax year.
You will still need to file your confirmation statement (annual return) and your annual accounts with Companies House. These are both statutory obligations even if the limited company is:
The company can be dormant according to Companies House and qualify as a small or 'micro-entity'. In this case, when you prepare annual accounts for a private limited company, you can:
Note: Check what you should include in the accounts for Companies House for micro-entities, small and dormant companies.
Companies House would call the company 'dormant' if there were no 'significant' transactions during the financial year. Note that significant transactions do not include:
There would be no need to inform Companies House if you decide to restart trading. They would see the company is no longer dormant from the next set of non-dormant accounts that you file.
A Guide Explaining Dormant Companies and Associations in the United Kingdom