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Dormant company status definition: Companies House vs HMRC


A dormant company is, quite simply, one that is not active. It does not trade and has no transactions (with extremely few exceptions). A company could be dormant for any particular financial year or over its whole life since incorporation. However, it is important to note that dormant means slightly different things for Companies House and HMRC.


For Companies House, a company is dormant if it has had no 'significant transactions’ for the year. Significant transactions are any transactions other than:

  • filing fees paid to Companies House

  • penalties for late filing of accounts

  • money paid for shares when the company was incorporated

 

So, if your company only had the transactions above for a financial year, then it was dormant for that year according to Companies House. For more information, visit the Companies House website.


For HMRC, a company is dormant if it has not traded and there is no corporation tax liability for the year. There are specific circumstances where a company is dormant according to HMRC, which are if the company:

  • has stopped trading and has no other income, for example investments. Trading includes buying, selling, renting property, advertising, employing someone or getting interest

  • 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

 

But overall, both definitions are almost identical, and it effectively means that if your company is dormant according to one, it is dormant according to both.


What HMRC considers as a trade is vast, and covers anything from buying and selling goods and services, to earning interest, to managing investments, to running a payroll. Basically, any business activity will be a trade and thus disqualify the company from being dormant.


When it comes to filing dormant company accounts, there is no direct link between Companies House and HMRC, meaning that filing dormant accounts for one of them will not automatically file for the other. So, once you've filed your dormant accounts with Companies House, you still need to let HMRC know that your company was dormant. You can do this by notifying HMRC online, by phone or by post. You will need to tell them the company's name, UTR number and the date from which the company stopped trading. They will then manually update their records in order stop expecting corporation tax returns to be filed, halting the issue of notices to file a corporation tax return.


The dormancy notification to HMRC usually lasts only 5 years. Once the 5 years have elapsed, provided that your company is still dormant, you will need to notify HMRC again to extend it by another 5 years.


If your company became dormant part way through its financial year, you cannot file dormant accounts with Companies House and cannot avoid filing a corporation tax return with HMRC. You still need to file active accounts and a corporation tax return, but in its following year, if it was dormant for the full financial year, you can file dormant accounts and avoid the corporation tax return as long as you have notified dormancy status to HMRC.


Remember, even if you don't need to file corporation tax returns, you still need to file accounts with Companies House as a dormant company. Make it simple by choosing to file dormant accounts through our easy online filing service.


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