This guide will help you understand the process and provide valuable tips for setting up, maintaining, and winding down a dormant company.
We’ll also discuss how to stay compliant with HMRC rules regarding dormant companies.
What is a dormant company?
A dormant company is one that is not currently engaged in any commercial activity/trading or generating any income.
For corporation tax, HMRC deems this type of company to be dormant (inactive). Trading includes activities like buying, selling, renting, advertising and employing etc.
However, Companies House will consider your company dormant if it did not have significant transactions in the financial year. Any amount paid to Companies House in lieu of filing fee or penalties for late filings and any amount received by the company for issuing shares at the time of incorporation is excluded from the definition of significant transactions.
Dormant company registration
The registration process for making a company dormant is simple and is completed the same way a company registers with the Companies House.
What do you need
Prepare the following information before visiting Companies House to register your dormant business:
- The company name
- Office address
- The name of the Director/s
- The name of shareholder/s
- At least one SIC code
How to register
You can submit an online registration here.
Once the registration is completed, the information concerning your dormant company will be updated on the Companies House website and accessible to the general public.
Does my dormant business need a bank account?
Dormant companies are not required to open business bank accounts but are still subject to the same regulations as their more active counterparts.
To prevent any potential activity that could bring the company out of dormancy, it is recommended that all company bank accounts be closed when dormancy is declared.
How long can my company remain dormant?
There is no time limit on how long a business can be dormant, and it can be for any period of time, from a few months to the company’s entire lifespan.
What are my filing responsibilities as a dormant company?
There are a number of filings that must be made if a new business is registered with the goal of leaving it dormant for an extended length of time, such as :
|Corporation Tax||HMRC will write to the company within a few days of starting a limited company; you will need to :|
*Tell the HMRC that your company is dormant and commit to notify them within three months if you start trading again.
This may be done by writing a letter or returning the CT41G with a handwritten note indicating, “this business is inactive; we will let HMRC know within three months if the company begins operations.”
*Unless HMRC notifies you otherwise, you no longer have to pay Corporation Tax or file a Company Tax Return.
*Notify the HMRC of your dormant status here.
|Confirmation Statement||*Companies House requires a confirmation statement to provide a short description of the company’s executives and address.|
|Accounts||*Dormant accounts must show no activity throughout the 12-month accounting period.|
Changing a company to active
If a dormant limited company starts trading, the company directors must let HMRC know. This should be done within three months when the business starts earning income money or trading again.
How Do I Close a Limited Dormant Company?
Should you be able to demonstrate that your dormant limited company has not earned any income or engaged in any trading, you will not be required to pay any taxes upon closing the company.
Limited dormant company closure process
- You must obtain approval from the limited company’s directors and shareholders in a dormant company.
- Once you get approval, you must complete form DS01 and present it to Companies House.
- The company will then issue a notice of its imminent closure on the Gazette to let anybody else know.
- Your business will be officially closed if no objections are raised within three months of publishing.
If you are thinking about running a business through a limited company and intend to start trading within a few months’ time, or thinking to take a break, registering or making your company dormant will allow you to keep your company intact while taking on less filing responsibilities. .
Registering a dormant company requires a few simple steps, which can all be done online, and the company can remain dormant for as long as necessary. When it is time to make the company active again, specific procedures must be followed.
Finally, if you decide to close a limited dormant company, you will need to follow certain legal steps to do so correctly and avoid penalties or fines. By following these guidelines, you can ensure that your dormant company is managed efficiently and accurately.
Fusion Accountants are a team of specialists that offer advice and services to limited companies. If you are thinking about making your limited company dormant or active again, get in touch for quick service.