Treatment of Dormant Limited Companies

Posted 01/08/2019

If a limited company does not trade and receives no other income then its status can be declared as trading. Some companies may be dormant from incorporation with the intention for trade to start one day, and for the registration to reserve the company name. Other companies may put trading on hold for different reasons with the intention to resume business in the future.

If a company does become dormant they do need to update Companies House and HMRC by way of submitting accounts and tax returns. If a company has never received a ‘Notice to Complete a Company Tax Return’ the directors, or authorised agents, can contact HMRC by post or phone to inform them that the company is dormant. HMRC should then update their records accordingly and advise that they would need to be updated when the company begins trading.

If the company has submitted a Company Tax Return or received a ‘Notice to Complete’ then they would need to send in their next Company Tax Return by the next submission deadline date. The Company Tax Return will be the notification to HMRC that the company is now dormant. If the tax return shows the company as being non-trading with no other income for the period then there shouldn’t be any corporation tax calculated to be paid.

If a company has stopped trading and plans to close then the company should deregister for VAT within 30 days of declaring dormant status. If the company is planning to resume trading in the future then nil VAT submissions must be made by the company’s usual VAT deadlines to maintain the VAT registration. Similarly, if a company doesn’t plan to employ any employees in the current tax year it ceases trade it should close its PAYE scheme, and reopen it when trade commences.

Confirmation Statements and Annual Accounts will still be required to be submitted to Companies House each year. Companies House classes a company as dormant if no ‘significant’ transactions occurred in the accounting period. Payments to Companies House for filing purposes, such as the confirmation statement, and penalties for late accounts do not count as significant transactions as these payments occur even for dormant companies. A micro-entity or small dormant company can submit dormant accounts to Companies House rather than the full versions that a trading set of accounts entails.

Tags: dormant companies, limited companies, Companies House, annual accounts, corporation tax