A dormant company is defined as one that is listed with Companies House, however, is not performing any business operations or generating any business income. In such a scenario, the company is considered as inactive or dormant for corporation tax purposes. Also, it must be noted that a company can be inactive or dormant from the date of its inception, or it can turn into a dormant company post a certain period of activity. There are numerous reasons why a corporation may be inactive or dormant:
Certain companies can be dormant from the day of inception, however, most companies are active for a certain time period but then put an end to business trading for at least a period of time. Such trading businesses might be eligible to become inactive, a standing which will decrease the business’s continuing filing everyday tasks. To become dormant, there are numerous things a company must do:
Mark a trading company as Dormant
In order to make an on-going trading company dormant or inactive, an individual must:
Informing HMRC that the company is Dormant
To notify the HMRC, an organisation will be required to write to the local Corporation Tax Office declaring the date when an organisation will become or has become dormant. The company’s contact information will be e-mailed from HMRC. Later, HMRC will send to the respective registered office address a ‘Notification to send a Company Tax Return’. This notice will include the period of business operations prior to the company becoming dormant. Business will be required to finish and file the return and clear all the due / any tax owed.
HMRC will typically approve the dormant position of a business in written within approximately three weeks. From the date the organisation turns dormant, HMRC will stop considering the company as active – this means the business will not be able to receive a lot of the correspondence. In majority cases, the business will not be able to get in touch with HMRC until the corporation starts to trade again. Also, a few dormant organisations are businesses that have been listed, but not used. This might be because of numerous reasons, but can consist of:
As per the Companies House, a dormant company is categorised as an organisation without ‘noteworthy dealings during a financial year that a business would usually report.’ Substantial transactions don't include:
It is necessary for a dormant company to file a business tax return HMRC if it previously traded prior to becoming dormant. However, organisations that are inactive or dormant from the date of inception are not required to file any tax returns till they turn active.
You can write to HMRC for help with general Corporation Tax enquiries.Corporation Tax Services HM Revenue and Customs BX9 1AX United Kingdom
Can a Dormant Company Trade?
It is not possible for a dormant establishment to carry out any trading activity or receive any form of returns, which includes:
An inactive or dormant establishment that performs any such activities will lose its dormant trading status and will be required to make full statutory accounts.
Dormant company bank accounts
It is suitable to escape opening a business bank account when a business is dormant. If the company was trading formerly, it will be advisable to discontinue any business bank accounts as this will help prevent the business from any bank charges being applied. Any supplementary payments can be made by an individual from his/her personal account.
Paying money to a Dormant company
The only dealings that a dormant company can do via a business bank account are:
Making a Dormant company active
HMRC will ask a company to produce the below mentioned statutory information:
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