IT Contractor Tax Limited Company Accounts Accounting

IT contractors may choose to buy a dormant company to protect the name, or simply if they are considering using a limited company in the near future.

Contractors who are currently working via limited companies may also decide to make their companies dormant if they intend to cease trading, and may want to use the company again in the future. This means they don't have to go through the administrative processes involved in closing a company down for good.

This might happen if a limited company contractor switches to use an umbrella company for a period of time, or if they are taking a prolonged break from the contracting world for whatever reason.

Dormant Limited Company Responsibilities

There are no time limits to how long you can keep a limited company in 'dormant' mode, but there are a number of tasks you are still obliged to carry out:

1. You must still complete an Annual Return and file it with Companies House.

2. You must still file Annual Accounts with Companies House (a balance sheet and any relevant notes).

3. For Companies which have never traded, their annual accounts can be submitted via Form DCA (PDF). Companies who have previously traded, but have since become dormant may also be able to use Form DCA, but only if no transactions have been recorded in the current financial year and no residual balances exist.

4. Whilst the company is dormant, you must not generate any accounting transactions.

5. You must still inform Companies House to any changes in company personnel, or registered address changes.

6. The only allowable transactions for dormant companies are
- payment for shares taken by subscribers to the memorandum of association;
- fees paid to the Registrar of Companies for a change of company name, the re-registration of a company and filing annual returns; and
- payment of a civil penalty for late filing of accounts.

7. As a dormant company director, you can still be prosecuted if you don't submit documents to Companies House within the prescribed deadlines.

Further Information

You can read a complete guide to dormant companies on the Companies House site - GBA10.

You can reserve a dormant limited company for £65 from our company formations partner, Duport.

If you are currently contracting via a limited company and want to make it dormant, make sure you discuss the process with your contractor accountant first.