Dormant Company Accounts

What is a Dormant Company?

A dormant company is a registered business that isn’t currently trading or conducting any business transactions. Companies House and HMRC define a dormant company as follows:

• Companies House: A company is dormant if it has had “no significant accounting transactions” during a given financial period. This excludes certain payments such as share capital received from shareholders.

• HMRC: For tax purposes, HMRC considers a company dormant if it has no trading activity or taxable income, meaning there is no Corporation Tax liability.

Tax and Reporting Implications for a Dormant Company

Once a company becomes dormant, there are reduced filing and tax obligations:

• No Corporation Tax: Dormant companies are exempt from Corporation Tax and do not need to file tax returns while dormant.
• Simplified Accounts: Dormant company accounts only require minimal details for Companies House.
• Annual Confirmation Statement: Dormant companies are required to submit this annually to maintain registration status.

Failure to file on time can result in penalties, which may escalate based on the delay, and can ultimately risk the company being struck off the Companies House register.

How to Make a Company Dormant

If you want to make your company dormant, here are the steps to follow:

1. Notify HMRC: Inform HMRC in writing that the company is ceasing trading.
2. Stop Financial Transactions: Cease all business transactions, including closing any business accounts.
3. File Dormant Accounts: Submit dormant accounts with Companies House each financial year.
4. Submit Annual Confirmation Statement: This is still required to keep the company active on the register.

How to Reactivate a Dormant Company

If you decide to resume trading, you’ll need to re-register for Corporation Tax and update Companies House:

1. Inform HMRC: Notify HMRC that trading has resumed so they can update your Corporation Tax status.
2. Maintain Financial Records: Begin recording all financial activity from the reactivation date.
3. Submit Full Accounts: File full financial accounts with Companies House and update tax submissions.

Costs and Penalties for Dormant Companies

• Costs: Making a company dormant is typically free of charge, with small fees for filing with Companies House if needed.
• Penalties for Non-Compliance: Late filing penalties range from £150 for delays up to a month, escalating to £1,500 for more than six months’ delay.

Why Stay Compliant with Dormant Company Accounts?

Compliance with dormant company regulations ensures your company remains in good standing. Non-compliance can lead to penalties, loss of the company’s legal status, and the risk of being struck off the Companies House register, jeopardizing any future business plans.

Need Assistance?

For tailored guidance on managing dormant company accounts, reach out to us. Our professional services will help you stay compliant, avoid penalties, and keep your business in good standing.