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How to know if your company is dormant

Updated: 5 days ago

how to know if your company is dormant

Dormant means dormant, right?

Yes, in spoken terms.

But is it that simple for dormant company accounts?

Not quite…


To simplify it, a dormant company is one that has not traded (did not have any activities or any operations). Some may eagerly assert their own company to be dormant because there was “hardly anything going on”, but this may not meet the strict definition according to Companies House and HMRC. So, let’s dig deeper below.


‘Dormant’ according to Companies House

For Companies House, a company is dormant if it had no ‘significant transactions’ during the year. Significant transactions are any transactions apart from the following 3:


  • filing fees paid to Companies House

  • penalties for late filing of accounts

  • money paid for shares when the company was incorporated (share capital)


Click this link to read the reference to ‘significant transactions’ on the Companies House website.


If your company had no transactions apart from the 3 listed above, for a particular financial year, then it was dormant for that year. The way you let Companies House know is simply by filing dormant accounts, so there is no separate notice to give.


If you want to know more about what dormant accounts look like, check out our post on What are dormant accounts?


This is the definition you need to meet to file dormant accounts for Companies House. As for corporation tax returns for HMRC, their definition of ‘dormant’ is almost identical as for Companies House but it is still worth explaining the minor difference below.


‘Dormant’ according to HMRC

For HMRC, a company is dormant if it did not trade and there is no corporation tax liability for the year. Trading activities for HMRC are very broad and include the following examples:


  • Buying and selling goods and services to anyone

  • Marketing and advertising the business

  • Employing and paying salaries to staff (including directors)

  • Renting spaces for business operations

  • Earning income on investments such as interest (including from bank accounts) and dividends

  • Buying assets and real estate

  • Accruing for costs even if the money hasn’t been spent yet


This is the definition you need to meet to be exempt from filing a corporation tax return (and accounts) to HMRC. There is no equivalent “dormant corporation tax return”, so the way you let HMRC know your company is dormant is by notifying them either online or by phone/post. You can check further information on HMRC’s website about the need to file a corporation tax return.


Remember, even though you have notified HMRC that your company is dormant and did not file a corporation tax return, you still have to file accounts to Companies House, so why not make it simple and file dormant company accounts.


The bottom line is that although Companies House and HMRC have slightly different definitions of ‘dormant’, effectively if your company meets the definition for one it highly likely meets it for both.


If your company has been dormant since incorporation and for the financial year you need to file for, then this service is for you - click here to file now.

 

 

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