Dormant company obligations

If a company has stopped trading and has no other income then HMRC should be informed that it’s dormant for Corporation Tax purposes. HMRC can also send a notification if they think a company is dormant. This notice will state that a company or association is dormant and is not required to pay Corporation Tax or file Company Tax Returns.

A company is usually dormant for Corporation Tax if it:

  • has stopped trading and has no other income, for example investments
  • is a new limited company that hasn’t started trading
  • is an unincorporated association or club owing less than £100 Corporation Tax
  • is a flat management company

Limited companies are still required to file annual accounts and a confirmation statement even if the company is dormant for Corporation Tax and dormant according to Companies House. A company defined as ‘small’ by Companies House can instead file ‘dormant accounts’ and doesn’t have to include an auditor’s report.

A dormant company must also ensure they deregister for VAT within 30 days of your company becoming dormant and close any PAYE scheme. A company can stay dormant indefinitely, however there are costs associated with this option. This might usually be done if for example a company is restructuring its operations or want to keep hold of a company name, brand or trademark.

Planning note:

Companies that have previously been active, then dormant and then become active again must also ensure that they inform HMRC. The company will also be required to submit statutory accounts and company tax returns within the usual time-frame.

Posted in Corporation Tax

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