What is a dormant company?
A company or association may be ‘dormant’ if it is not trading and doesn’t have any other income – for example from investments.
A dormant company has different obligations for corporation tax, annual accounts and returns for Companies House in comparison to a trading company.
Dormant companies and corporation tax
Your company is usually dormant for corporation tax if:
- the company has stopped trading and has no other income
- is a new limited company that hasn’t yet started trading
If HMRC think your company is dormant, you may get a letter informing you of the decision to treat the company as dormant, and that you don’t have to pay Corporation Tax nor file Company Tax Returns (form CT600.)
If you have not received a ‘notice to deliver a Company Tax Return’ HMRC can be informed of company dormancy by post or over the phone.
If the company becomes active after a period of dormancy, HMRC must be informed within 3 months.
Dormant companies and VAT
If the company was registered for VAT before becoming dormant the company should deregister for VAT within 30 days of the company becoming dormant, unless there are plans for the company to continue trading in the future, then NIL (empty) VAT returns should be sent while the company is dormant.
Dormant companies and employees
If the company has become dormant and there are no plans to restart trading in the financial year, the PAYE scheme in operation by the company should be closed.
Dormant companies and Companies House
A company must file a confirmation statement (previously an annual return) and annual accounts with Companies House, even if the company is dormant for Corporation Tax, and dormant according to Companies House.
A company is classified as dormant by Companies House if it’s had no ‘significant’ transactions in the financial year. Significant transactions could include operating a payroll, earning interest or paying bank charges and fees. Non-significant transactions that are allowed to be undertaken by a company include:
- Payment of shares by subscribers
- Fees paid to Companies House for filing a confirmation statement
- Late filing penalties paid to Companies House
Companies House do not need to be informed if trading is restarted – the next set of non-dormant accounts filed will show the company is no longer dormant.
If you would like to discuss any of this further then please contact us on 0116 242 3400.
Aiden Hyett, Accounts & Tax