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Beginners' Guide to Dormant Companies

Businesses House in the United Kingdom mandates all limited companies, whether trade or otherwise, to file yearly accounts and a confirmation statement.

By cheap accountantPublished 9 months ago 3 min read
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This includes inactive businesses. Aside from administering the firm, it is the board of directors' responsibility to file the company's accounts and reports correctly and on time. While the board of directors may not be concerned about a dormant company Accounts, they are nevertheless obligated to file yearly accounts and send Companies House confirmation statements every year, even if they have no intention of continuing any type of economic activity or receiving any type of money.

A corporation is deemed "dormant" if it has ceased all business activities and no longer gets any type of income (i.e. investments). For Corporation Tax and Company Tax refunds, as well as a company's yearly filings with Companies House, the term "dormant" can have several meanings. Though uncommon, some boards of directors mistakenly believe that Companies House will not require their annual reports to be produced since HMRC does not. The two government entities, however, follow separate sets of norms.

Once a company informs HMRC that it is dormant, it is no longer required to pay Corporation Tax or file another Company Tax Return (unless the HMRC explicitly gives them notification to submit a new Company Tax Return). However, a defunct business must still file a confirmation statement and yearly accounts with Companies House.

The Companies House determines whether or not a company is dormant, and a corporation becomes dormant when there are no substantial accounting transactions in the fiscal year in which its accounts are filed. The substantial accounting transaction is noted in the company's accounting records, which are submitted to HMRC and Companies House.

Significant trades exclude:

  • Fees for filing with Companies House
  • Account filing penalties
  • Money paid for shares when the company was formed

Dormant businesses are those that no longer have any "active" transactions occurring in the fiscal year in which they are meant to. A inactive business that qualifies as 'small' under Companies House guidelines can file 'dormant accounts' without including an auditor's report in its accounts.

It costs nothing to file dormant accounts, but if a dormant company files late or fails to file for the fiscal year, penalties and other charges will undoubtedly be spent. The board of directors is responsible for filling their accounts and should take this job seriously; otherwise, non-compliance may result in further fines and may even result in Companies House removing your company from the registry.

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Dormant businesses can file their confirmation statement online for a charge of £13.

When a defunct business resumes trading, it is not required to notify Companies House. When they submit their accounts again, it will state that they are no longer a dormant corporation. If the board of directors no longer sees a need for the company to exist, they can close it using the new Companies House online tool.

Dormant companies (sometimes known as 'inactive companies') are frequently confused for closed or extinct businesses; this is incorrect. Companies can declare their institution as a dormant firm under normal conditions for reasons such as:

  1. To reserve a company name before the company begins formally trading.
  2. Restructuring a formerly active business
  3. Defending intellectual property and trading rights against unauthorised usage by other businesses

The reasons why a company may desire to go into dormancy are unimportant. What's vital is that they understand the dormancy phase that their company is entering and what regulations and other duties (imposed by Companies House) they must follow in order to keep their company dormant.

Table of Contents

  • What is a Dormant Company?
  • Why Should I Put My Business on Hold?
  • How Do I Put My Business On Hold?
  • What Are My Responsibilities?
  • When Can I Put My Business on Hold?
  • How to Put a Private Company to Sleep
  • How Do I Inform HMRC That My Company Is No Longer Active?
  • How Much Does it Cost to Put a Business on Hold?
  • How Do I Get Money From My Dormant Company?
  • How Do I Resurrect My Dormant Business?
  • Can I form a company and then leave it dormant?
  • How Long Can I Keep My Company Dormant?
  • Do Dormant Businesses Need to File Annual Returns?
  • Is it necessary to audit dormant companies?
  • Is a Dormant Corporation Required to Have a Bank Account?

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