If you have incorporated a limited company but it has not started trading by the end of the accounting period or the company has stopped trading, you may wish to make the company dormant company. In this article we discuss why you may decide to set a limited company as dormant and the process of making a limited company dormant with both Companies House and HMRC.
What is a Dormant Company?
A dormant company can be any company that is incorporated and is on the Companies House Register but has not traded within its accounting period, this would be any company that it has not received any income and had no expenditure throughout its accounting period.
A dormant company could be any company that is:
- A newly incorporated company that hasn't started trading yet
- A company that has previously traded but has stopped trading but it intends to trade again in the future
- An unincorporated association or club that has less than £100 corporation tax to pay
- A flat management company (subject to certain rules)
There is no specified length of time that a company can remain dormant for but it is of utmost importance to inform HMRC at the earliest available point in time that the company is dormant, as well as keeping up to date with the obligatory filing requirements with Companies House.
Who decides if the Company is dormant?
If your company has had no income nor expenditure within its accounting period and you wish to change its trading status to dormant then you can do so by informing HMRC either by phone or online through HMRC's Website. When informing HMRC of the company's dormant status you should provide them with the date that the company was dormant from as well as the Company's Name and its Unique Tax Reference number.
Once HMRC have been informed that the company is dormant the company would no longer need to file a corporation tax return to HMRC until they start trading or if HMRC send the company a 'Notice To Deliver a Company Tax Return' in the mail to the company's registered address.
How to File A CT600 For A Dormant?
If HMRC sends you a 'Notice To Deliver a Company Tax Return', then you would be required to submit a CT600 (Corporation Tax Return) for the dates stated on the correspondence received from HMRC before it can become dormant.
If your company was dormant during its accounting period but has been requested to file a CT600, you can file this through EasyDigitalFiling's software. As a dormant company it would have had no income or expenditure throughout the period, therefore the 'Tax Calculation' can be left blank and all that would be required is to complete the 'Declaration' page within the CT600 return accordingly:
Step 1. Firstly, Box 80 should be ticked to 'No' as the company had no income or expenditure it would not need to attach accounts to the CT600 return.
Step 2. Then, in Box 90 please select 'Dormant Company'. This is the reason why no company accounts are being attached to the CT600 return.
Companies House Requirements
Even if you are a dormant company, you must still file a Confirmation Statement each year to Companies House, as well as filing the dormant annual accounts. Companies House considered a company to be dormant if it has had no significant transactions during its financial period.
You can file dormant accounts through EasyDigitalFiling Corporation Tax and Accounts software. This can be done by simply creating your Companies House Accounts submission and accompanying accounts. Once open, within the Company information page, set 'Create full statutory accounts' to 'No' and then set 'Create dormant company accounts' to 'Yes'.
Once you have filled in your balance sheet and signed your declaration, the dormant company accounts can then be submitted to Companies House once you are ready.
Restarting a dormant company
If you wish to start trading or re-start trading, you will need to notify HMRC by registering for corporation tax again.
You would not need to inform Companies House that you have started trading again, however, when you are due to file your next set of company accounts you would need to file as a
non-dormant company.
