If your company has stopped trading, it may be classed as dormant. But that doesn’t mean that your ongoing compliance responsibilities stop, too. HMRC and Companies House each have their own definition of a dormant company, and understanding these will help you determine whether your company is dormant and what you need to do next.
In this guide, we’ll explain what counts as a dormant company, when (and when not) to tell HMRC your company is dormant, and how to go about it. You’ll also learn what HMRC and Companies House expect dormant companies to do to stay compliant.
Key takeaways
- A dormant company generally means no trading or significant accounting transactions.
- HMRC and Companies House use different definitions, and you need to understand both.
- You need to tell HMRC if your company becomes dormant or is intended to be dormant from incorporation.
- You must still file an annual confirmation statement and accounts for your dormant company.
- You must notify HMRC within 3 months if your company is no longer dormant.
What counts as a dormant company?
A dormant company, put simply, is one that isn’t actually doing any business or receiving income or paying expenses by any other means – from investments, for example.
However, this is a broad definition. It’s best to understand how HMRC and Companies House define a dormant company, as each has a slightly different definition.
Dormant for Corporation Tax – HMRC
HMRC considers a company dormant for Corporation Tax if:
- It has stopped trading and isn’t earning any other income
- It’s a new limited company that hasn’t started trading yet
- It’s an unincorporated club or association that’s run for the benefit of its members and owes less than £100 in Corporation Tax
- It’s a flat management company
Detailed guidance is available to help you determine whether your company is dormant. Find information on the business activities included in HMRC’s definition of “trading”.
Dormant for Companies House
A company is considered dormant for Companies House if it hasn’t had any significant accounting transactions during its entire financial year. This essentially means that the dormant company hasn’t generated income – for instance, earned any interest – or paid any expenses during the relevant period.
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All income and expenditure is “significant” unless it is one of these:
- Filing fees paid to Companies House
- Penalties for filing your accounts late
- Payment received for shares that were taken up at incorporation
HMRC vs Companies House definitions at a glance
Here’s a quick summary of the two dormant company definitions we’ve covered here:
| HMRC definition | Companies House definition |
|---|---|
| Dormant means no trading and no other income, or a new limited company that hasn’t started trading yet | Dormant means no significant accounting transactions – such as receiving income, earning interest, or paying staff – in the most recent financial year |
| Also known as “dormant for Corporation Tax” | Also known as “dormant for Companies House’s purposes” |
| Tax activity matters – are you doing business or receiving income that is subject to tax? | Accounting activity matters – have you had transactions that must be recorded? |
| Understand HMRC’s definition of “trading” to avoid mistakes | Know what Companies House considers “significant” |
When should I tell HMRC my company is dormant?
Whether you should tell HMRC that your company is dormant depends on whether it has ever been active.
If your dormant company has never traded
You should tell HMRC that your company is dormant if it is a limited company intended to be dormant from the date of incorporation. You may, for example, register a dormant company to reserve a company name that you plan to use later.
If your dormant company has previously been active
You still need to tell HMRC if your company becomes dormant after previously being active. Do it immediately after you stop trading. Once you’ve gone through a full financial period without trading, you won’t need to submit tax returns.
There’s no specific deadline for informing HMRC that an active company is being made dormant. However, HMRC will expect you to keep up with any relevant filings and payments until it knows your company is dormant. Once it does, you don’t need to pay Corporation Tax or file any more tax returns.
Learn more in our guide to dormant companies.
The benefits of keeping a company dormant vs. striking it off
Strike off is a formal process by which Companies House removes your company from its register. In other words, the company is closed for business, or dissolved, and no longer exists. Your company must fulfil very specific criteria to be eligible for voluntary strike off. Applying when your company doesn’t qualify is illegal.
If your company isn’t trading or receiving any income, why not strike it off? While individual circumstances vary, keeping a dormant company is a more common option. It means you can:
- Keep the company, name, brand and corporate vehicle ‘alive’ for later use
- Start trading again with relative ease
- Avoid the hassle of restoring a dissolved company if you change your mind
- Maintain control of company assets without having to transfer them out first
How to tell HMRC my company is dormant
The easiest way to tell HMRC your company is dormant is to use its online service. Alternatively, you can phone HMRC on 0300 200 3410, or send a letter to the following address:
Corporation Tax Services
HM Revenue and Customs
BX9 1AX
United Kingdom
At Rapid Formations, we’ve created a free dormant notification letter template you can download and use to notify HMRC that your company is dormant.
Checklist for previously active dormant companies
If your company was previously active, double-check that you’ve taken all the practical steps to make it dormant before informing HMRC. These can include:
- Paying any outstanding bills and taxes
- Paying all remaining staff wages in full
- Actioning relevant redundancy processes
- Cancelling all contractual agreements
- Deregistering for VAT
- Closing your business bank accounts
Once you’ve taken the necessary actions, inform HMRC that your company is dormant.
What to do if your company is no longer dormant
If your dormant company becomes active, you must notify HMRC within 3 months from the date it starts trading again. This is a legal requirement, and you could face penalties for failing to inform HMRC or for failing to do so on time.
If your company was previously active, you must also resume filing annual tax returns with HMRC and annual accounts with Companies House.
If your company has been dormant since incorporation but you’ve started trading for the first time, you must also add Corporation Tax services to your online HMRC account. You’ll need the following to hand:
- Company registration number
- Your company’s UTR number
- Date you started trading
- Date your first accounts are made up to
Do dormant companies still need to file accounts?
Yes, you still need to submit accounts and confirmation statements to Companies House if your company is dormant. HMRC doesn’t expect any further tax returns for your dormant company once you’ve submitted and settled your final Corporation Tax return.
Learn more about the purpose and requirements of your company’s confirmation statement.
Dormant company compliance
Use this dormant company compliance checklist to stay on top of your responsibilities:
| Trigger | Immediate actions | Ongoing responsibilities |
|---|---|---|
| You incorporate a company that will be dormant from day one | Tell HMRC that your company is dormant via the online service, phone, or letter. | File annual confirmation statement and dormant accounts with Companies House, plus keep Companies House up to date of any changes (e.g. changes to details of the directors) |
| Your company was active but is now becoming dormant | Make it dormant in practice: settle bills/taxes, pay wages, handle redundancies, cancel contracts, etc. Tell HMRC your company is dormant | You may be eligible to submit dormant accounts. Don’t forget: keep Companies House up to date of any changes (e.g. changes to details of the directors) and continue submitting your annual confirmation statement |
| HMRC sends you a letter saying they’ll treat your company as dormant | You can cease submitting Corporation Tax Returns | Keep filing an annual confirmation statement and dormant accounts, plus keep Companies House up to date of any changes |
| HMRC sends you a notice to deliver a Company Tax Return | Submit the tax return for the period as required | Keep filing annual confirmation statements and dormant accounts, and keep Companies House up to date with any changes. You may need to submit future returns |
| You’re VAT-registered, and the company becomes dormant | Deregister for VAT within 30 days of becoming dormant | Re-register if your company becomes active again and is VAT eligible |
| Your company stops being dormant (you start trading or receive income) | Tell HMRC within 3 months of the date you start trading or receiving income | Resume annual tax returns to HMRC and annual accounts to Companies House in addition to your confirmation statement and all other updates to your company’s details |
| Your company has been dormant since incorporation and starts trading for the first time | Add Corporation Tax services to your HMRC online account | Continue HMRC and Companies House filings as an active company |
Support for you and your limited company
Making your company dormant can be a useful way to keep it in place without trading. But it still comes with responsibilities.
To stay compliant, ensure your company meets the dormancy definition applicable to HMRC and Companies House, notify HMRC when required, and continue filing your annual confirmation statement and accounts with Companies House.
If you decide to start trading or receive income again, inform HMRC within 3 months and return to the normal tax and filing requirements.
Need to register, dissolve or make a company dormant? Rapid Formations delivers a range of compliance services tailored to your company’s lifecycle. Explore our Dormant Company Accounts Service.
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