There may be a time when you want to take a break from contracting or other business activity, whilst keeping your limited company in an ‘inactive’ state.
This can help you avoid the time and expense of closing the company, while preserving it for future use.
You may opt to keep a limited company dormant for a number of other reasons; to protect a brand, prevent the same name being registered by another business, or to secure intellectual property.
Even if a company is ‘dormant’, you still need to file accounts with Companies House every year.
As the director of the company, it is your responsibility to ensure that accounts are submitted, regardless of whether the company has been trading during the past financial year.
So, when exactly is a company considered to be ‘dormant’, and what kind of information do you need to file to meet your tax obligations?
When is a limited company dormant?
For the company to remain dormant, however, no significant transactions or trading can occur during the financial year.
This includes buying and selling goods through the company, operating a payroll, issuing dividends, renting property, earning interest from a bank or paying bank charges on company transactions.
Any of the above activities will result in the company losing its dormant status.
A company can remain dormant indefinitely provided you fulfil the necessary filing/reporting obligations as required by HMRC.
Dormant company accounts and confirmation statement
Dormant accounts should include a balance sheet and any relevant notes for the past financial year.
The company should submit their dormant accounts to Companies House every year, no later than nine months after the end of the company’s financial year.
This statement provides important company information, including the name and registered address of the company, details of the directors, the location of statutory records, shareholder or guarantor details, the register of people with significant control, and information about the share capital.
The due date for filing a confirmation statement for the dormant company is on the anniversary of the date the company was registered. You have 14 days from this date to file the confirmation statement.
This applies even if there is no change to the relevant details. The information provided in the statement to Companies House is available for public viewing.
It’s essential to note that if a dormant company spends or receives money, it will forfeit its dormant status and be considered active, thereby becoming liable to pay corporation tax.
The simplest option is not to open a business account at all.
If you’re making an active company dormant (see below), you’ll have to formally close any existing account, ensuring that all bills, liabilities and bank charges are paid in full.
Please remember to cancel any standing orders or direct debits and notify suppliers and clients that no further payments can be made into this account.
Any incidental costs for the dormant company, such as an accountant’s fees or incorporation costs, can be paid for via your personal account.
Dormant company tax liability
As long as the company is inactive throughout the financial year, you won’t have any tax liabilities and won’t have to file a tax return or prepare detailed accounts.
If the company ceases or starts trading during the financial year, you’ll be liable for tax on any income generated and will have to submit accounts and tax returns for the relevant period.
To make an active company dormant
If you want to make an active company dormant, you’ll have to contact HMRC (preferably in writing), who will issue you with a notice for a company tax return.
You’ll have to file the return and pay any tax liability on profits made before the company became dormant.
If you were registered for VAT, you should notify HMRC that you have ceased trading and wish to cancel your registration.
You can do this in writing or by using form VAT 7. You’ll have to pay any VAT due and file a final VAT return.
To make a dormant company active
To make a previously dormant company active, you must inform HMRC within three months of the date you start trading.
You can do this by signing in to your account and registering the company as active. If the company hasn’t traded before, you can register online for corporation tax.
Dormant Limited Company FAQs
Can a dormant company hold a bank account?
Yes. A dormant company can retain a bank account, provided it does not carry out any transactions other than paying charges like service or filing fees.
Do dormant companies need to file confirmation statements?
Yes. Even dormant companies must file a Confirmation Statement (CS01) annually, confirming details such as directors, shareholders, and registered address.
Can a dormant company own property?
Yes. You can hold assets like property in a dormant company, but any income from those assets (e.g., rent) will usually render the company active for accounting purposes.
Can I reactivate a dormant company?
Yes. To reactivate, simply start trading again and notify HMRC. You’ll need to maintain full accounting records and file annual accounts and tax returns accordingly.
What counts as permissible activity for dormancy?
Activities like paying registration, filing, and bank interest are allowed. But once you issue invoices, receive payments, or earn trading income, the company becomes active.
Do dormant companies need to prepare accounts?
Yes, but they can file simplified dormant accounts to Companies House. You still need to file the full statutory accounts to HMRC if they’re required.
Is there a fee to keep a company dormant?
There’s no official Companies House fee to remain dormant, aside from the £34 Confirmation Statement and any bank or service charges your company incurs.
Can I transfer ownership while dormant?
Yes. Shares in a dormant company can be transferred or sold like any other company, and you can update the shareholder register and notify Companies House accordingly.
Can a dormant company change its registered address?
Yes. A dormant company can change its registered office at any time by filing form AD01 with Companies House.
Can HMRC strike off a dormant company?
Yes. If a dormant company repeatedly fails to file required documents (accounts or Confirmation Statements), Companies House may strike it off the register.
