Both Companies House and HMRC will consider any company that is presently not trading as inactive or dormant. It is not necessary to inform Companies House that your company is dormant until your annual accounts are due though HMRC must be informed. You can simply contact your local corporation tax office in writing or visit the HMRC website and use the Tax office locator function.
Reasons for a company not trading or being dormant
There are several reasons why a company may be dormant which includes the following;
- Having a company name reserved for a future business
- A company being dormant to trade at a later date
- Restructuring your business whilst no form of income is received or no employees are paid
- Holding an asset or piece of intellectual property
Even though a company is dormant, there are still certain expenses and responsibilities that apply to maintaining your company on the official register. There are also certain legal obligations that must be that must be completed with Companies and HMRC.
Every year all limited companies must submit annual accounts to Companies House regardless of whether a company is trading or not. Accounts that are dormant will still include a company balance sheet which will outline the company’s assets and liabilities. Limited companies must submit all annual accounts within 9 months of the company’s ARD or Accounting Reference date which is the financial year end for your company. In most cases this will be the last day of the month from when a company was incorporated. Annual returns will also need to be submitted each year which will outline all the key information regarding your company such as directors, shareholders, company name, the company’s registered office and information regarding the company’s shares and share capital.
Annual returns are submitted each year on the date that your company was incorporated. Companies house should also be informed of any changes regarding the details of your annual return and any changes to the Memorandum and Articles of Association. Annual returns also incur a fee to cover general processing and administration.
HMRC is automatically notified when any new company is formed and all necessary documents containing your UTR or unique taxpayers reference and your company’s obligations concerning tax will be sent directly two your registered office address. From the perspective of HMRC, a company is regarded as dormant if it is not performing any business activities such as purchasing or selling goods or services that are aimed at making a profit. This will include providing any type of service or receiving income from other sources.
If a company is dormant from the date it was incorporated then it is necessary to contact your local Corporation tax office. HMRC normally need to be notified within 3 months of a business beginning to trade. From this date the company will be liable to pay incorporation tax and submit company tax returns. Other considerations include VAT registration if annual company turnover exceeds £79,000 and PAYE registration if your company employs staff.