A dormant company is a limited company that has been registered by Companies House but is not actively trading and has no income. Companies become dormant for different reasons. In some cases, the company may be incorporated but remain dormant until it is ready to start trading. In other cases, the company may have been trading but then became dormant, perhaps due to a planned restructuring. Although a dormant company may not be trading, certain filing requirements must still be met by law.
In this article we will explain everything you need to know about dormant companies in the UK, including what is meant by a “dormant company” from the perspectives of HMRC and Companies House, how to notify the relevant authorities that a company is dormant, the filing and reporting requirements and how to make a dormant company active again.
Defining Dormant Companies in the UK
A dormant company is one that is not currently doing business (i.e. it is not trading) and has no other forms of income (e.g. income from investments). The term “dormant company” has slightly different meanings from the perspectives of HM Revenue & Customs (HMRC) and Companies House.
Dormant for Corporation Tax
From HMRC’s perspective, a company may qualify as dormant if it is:
- Currently not trading and has no other income (e.g. investments).
- A new limited company that has yet to begin trading.
- An unincorporated association or club that owes HMRC less than £100 in Corporation Tax.
- A flat management company.
Generally, your company is considered to be active (i.e. not dormant) for Corporation Tax purposes when it is:
- Carrying on a business activity, such as a trade or professional activity.
- Buying and selling goods with a view to making a profit or surplus.
- Providing services.
- Earning interest.
- Managing investments.
- Receiving any other income.
Dormant for Companies House
Companies House views a company as dormant if it has had no “significant” transactions within the financial year. A significant accounting transaction is one that the company should enter in its accounting records. Significant transactions do not include:
- Filing fees paid to Companies House (such as confirmation statement fees, change of name fees, etc.).
- Penalties for late filing of accounts.
- Money paid for shares when the company was incorporated.
If no such transactions have occurred then the company can have dormant status.
The rules are extremely strict in this area. Any transaction that does not fit into one of the three types allowed, as listed above, will be considered a “significant accounting transaction”, no matter how small it may be, and could mean that the company is no longer considered to be dormant.
Example of a Significant Accounting Transaction:
If a dormant company earns £5 in bank interest then this is considered a significant accounting transaction. As a result, the company would no longer be considered dormant by Companies House and would need to file full accounts.
To remain dormant, it is important to ensure that the company does not trade or receive any form of income. Any activity – such as buying and selling goods, employing staff, leasing property, paying salaries and/or dividends, receiving dividends from investments or even receiving bank interest – may mean that the company is no longer considered dormant. In that case, the directors must prepare full accounts each year and meet the normal filing requirements of a registered company.
How Do I Make a Company Dormant with HMRC?
Depending on the circumstances, you may not need to inform HMRC that your company is dormant. Based on the information they hold about your company they may write to you automatically to tell you that they believe it to be dormant. In this case the letter will inform you that they are treating your company or association as dormant and that you do not need to pay Corporation Tax or file Company Tax Returns.
Informing HMRC Yourself
If HMRC does not contact you, or if you want to inform them proactively, you can let HMRC know that your company is dormant in the following ways:
- Online: Inform HMRC through the online service. You will need your company name, 10-digit Unique Taxpayer Reference (UTR) and the date on which your company stopped trading.
- Telephone: Call HMRC on 0300 200 3410 (Outside UK: +44 151 268 0571).
- Post: Write to:
Corporation Tax Services
HM Revenue and Customs
BX9 1AX
United Kingdom
For up-to-date contact details, visit HMRC Corporation Tax enquiries.
After Informing HMRC
HMRC will normally write to the company’s registered office address within 15 days, confirming that it is dormant. From this point you will not need to deal with HMRC unless your company begins to trade again.
Once HMRC knows that your limited company is dormant, you will not need to pay Corporation Tax or file another Company Tax Return unless your company becomes active again. The only exception to this is if you receive a notice to file a Company Tax Return from HMRC because your company has been trading. In that case, you will need to complete the Company Tax Return and file it online for the period before your company became dormant.
Settling Outstanding Matters
Before registering your company as dormant, ensure that:
- All bills owed by the company are paid, including all wages, salaries, dividends and payments due to suppliers.
- All money owed to the business is collected.
How to Make a Company Dormant with Companies House
There is no immediate requirement to notify Companies House that your company has become dormant. To inform Companies House that your company is dormant, however, you must:
- File Your Annual Confirmation Statement: This confirms that your company’s details are up to date.
- Prepare and File Dormant Company Accounts: Submit dormant accounts instead of full statutory accounts.
Companies House Filing Requirements for Dormant Companies
It is important for all directors of dormant companies to understand that, although the company is not currently active, annual accounts and confirmation statements must still be filed with Companies House every year.
When to File Your Dormant Accounts
Every company has an accounting reference date (ARD), which determines the end of its financial year. The deadline for filing your accounts is calculated from this date.
- New Companies: The ARD is the anniversary of the last day in the month that the company was incorporated.
- Existing Companies: The ARD is the anniversary of the day after the previous financial year ended.
Deadline for Filing Accounts:
- Private Companies: 9 months from the ARD.
- Public Companies: 6 months from the ARD.
If your company was incorporated on 4 March 2022 then the ARD – accounting reference date – would be 31 March 2023. In future years your annual accounts will therefore typically cover the period from 1 April to 31 March.
Filing Dormant Company Accounts Using Form AA02
For dormant companies that have not traded since incorporation, you can submit dormant accounts using the simplified procedure with Form AA02.
Criteria to Use Form AA02:
- The company is limited by shares.
- It has never traded.
- The only transaction is the issue of subscriber shares.
Uniwide Formations offers a service to assist you in filing your dormant company accounts using Form AA02. We simplify the process by handling the filing on your behalf, ensuring compliance with Companies House requirements.
Filing Dormant Company Accounts in Other Cases
If your company has traded in the past, but has since become dormant, then you can still file dormant accounts with Companies House provided that the company qualifies as “small”. Although you cannot use the simplified Form AA02 (which is only for companies that have never traded), you can prepare dormant accounts using standard statutory accounts formats, indicating that the company is now dormant.
Criteria for a Small Company
A company is considered small if it meets at least two of the following three criteria:
| Criteria | Threshold |
|---|---|
| Turnover | £10.2 million or less |
| Balance Sheet Total | £5.1 million or less |
| Number of Employees | 50 or fewer |
Furthermore, dormant companies that qualify as “small” are exempt from audit and do not need to provide an annual auditor’s report.
How to Reactivate a Dormant Company
If you decide to start trading again then you must inform HMRC and Companies House that your company is once more active. To inform HMRC you should register for Corporation Tax online within three months of resuming business activities. You will need your company registration number, the date on which you began to trade again and your company Unique Taxpayer Reference (UTR).
Regarding Companies House, you must begin to prepare and file full statutory accounts as active companies are required to do. Furthermore, you must also continue filing your annual confirmation statements to keep your company information up to date on the public register.
Frequently asked questions
Will HMRC still require a tax return if I File a Dormant Company Account?
You must inform HMRC that you company is dormant. Only once HMRC have agreed that they will treat your company as Dormant will you be relieved from the requirement to file a tax return. If you have had a letter from them acknowledging that the company is dormant (and it is still current) you will not need to make any further filing to HMRC.
If HMRC have not agreed to treat you company as Dormant then they may demand that a tax return be filed and even fine a company for late delivery of the return even if no tax is payable.
What should I do with my dormant company bank account?
As outlined above, if you receive any form of income then your company may not meet the criteria of a dormant entity. This is why it is preferable, where possible, to close the company bank account to avoid the possibility of money being paid to or from the business while it is in a dormant state. Even a small bank fee being paid from the bank or an interest payment received may mean that the company is no longer qualified as being dormant. Certain payments, however, are exempt from the assessment of whether a company is dormant (see the section above: ‘‘Which payments are exempt when assessing dormant company status?’’).
If a bank account is yet to be opened for a newly registered company then it may be better not to set up an account until the company is about to begin trading.
Conclusion
HMRC and Companies House impose strict rules and requirements on dormant companies in the UK. This is why it is so important for limited company directors to be aware of the dormant company filing rules, even if they are not actively involved in the business.
Where possible, it is advisable to set reminders for any dormant company filing deadlines, including for the annual confirmation statement and dormant company accounts, to ensure ongoing compliance and help avoid potential penalties. If your company has never traded and you need help filing dormant company accounts using Form AA02 then Uniwide Formations offers a professional service to simplify this process. Our team can handle the filing on your behalf, ensuring compliance with Companies House requirements.
For companies that have previously traded and require more complex dormant accounts, we can introduce you to a qualified accountant who can provide expert guidance and support. Visit our page Introduction to an Accountant to find out how we can help you.
