What is a dormant limited company?

by Gavin Hooker

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Many business owners have companies in the background to ‘save the name’ or just changed their plans and didn’t ever trade through them. However, on rare occasions, a previously busy trading company may become dormant. Making your company dormant is a little more complex than deciding to let it sit there.

What is ‘dormant’ differs depending on who is looking at the affairs of the company.

HMRC may see it differently to Companies House. It’s entirely possible for you to consider your company dormant when neither of these two organisations do!

HMRC will see you as dormant if your company is:

  • Not trading and does not receive any other income
  • A new limited company that hasn’t started trading yet.
  • A flat management company.
  • An unincorporated association or charity that owes less than £100 corporation tax.

If you are considered dormant by HMRC (and you have notified them that you are dormant), then they will not generally ask for a Corporation Tax Return to be completed.

If you are in any way trading, or even earning interest, HMRC may not view you as dormant.

Companies House will see you as dormant if your company is:

  • One that has had no significant accounting transactions during the accounting period.

A ‘significant’ accounting transaction is defined as one that the company should enter in its accounting records. If there are none of these transactions during the financial period then the company can have dormant company status.

In order to keep a dormant company “live” you need to do a few things with Companies House each year.

The benefit of being dormant is that the filing requirements are a lot less onerous. You can usually just submit a simple set of accounts with Companies House, and a return known as the Confirmation Statement/Persons of Significant Control register.

If you are thinking of making your business dormant or need assistance with filing your accounts and returns, please talk to us as we can make sure you are dormant.

The content in this blog is correct as at 29 June 2021.