What is a dormant company and how does it work?

A dormant company is a limited company that isn’t trading and isn’t receiving any other income. In other words, it’s not doing business, so it’s treated as inactive for Corporation Tax. But this is just a general definition. The exact one depends on which authority is defining your company’s status.

This guide explains how HMRC and Companies House define a dormant company and your obligations. You’ll also learn why some companies are dormant from day one and how dormant companies can become active.

Dormant company definition

There are two definitions of a dormant company that you need to know about – one used by Companies House, and another used by HM Revenue and Customs (HMRC). Though slightly different from one another, they’re closely linked.

HMRC defines a company as dormant for Corporation Tax purposes if it isn’t trading and isn’t earning any other income. Companies House defines a company as dormant if it hasn’t had any significant accounting transactions during a full financial year.

Put simply, a dormant company is not trading or earning income and has no significant transactions in the financial year.

What counts as trading activity?

If your dormant company carries out any of the following trading activities, you’ll lose your dormant status with HMRC immediately and become ‘active’ for Corporation Tax.

• Buying and selling goods and services
• Renting or purchasing property
• Operating payroll
• Paying directors’ salaries
• Issuing shareholders’ dividends
• Managing investments
• Receiving dividend payments
• Earning interest
• Paying bank charges and fees
• Paying accountancy fees through the business bank account

Note that dormant companies can make the following transactions without losing their dormant status with Companies House because these don’t count as ‘significant’:

• Receiving payment for shares from the first shareholders who join the company at the time of incorporation
• Paying fees to Companies House for filing annual confirmation statements, changing the company name, or re-registering the company.
• Paying late filing penalties to Companies House

Does my dormant company need a bank account?

Dormant companies can’t spend or receive any money, so you don’t normally need to keep a business bank account when your company is dormant. In fact, closing your business bank account is a good way to protect your dormant status because it removes the risk of accidental income or expenditure.

Even the smallest transaction, like earning interest or paying bank fees, would mean losing your dormant status and becoming active for Corporation Tax. These are also considered trading activities, so you’d have to prepare full accounts for Companies House.

How to close a business bank account

Before closing any active business bank accounts, remember to:

• Settle all bills and liabilities, including bank fees
• Cancel all direct debits and standing orders
• Contact your suppliers and service providers to ensure no further payments are taken from your account

When everything is in order, call or visit your bank to formally close your company’s business bank account. You may also be able to close your account online or via a mobile app, depending on your bank.

Why would someone register a dormant company?

While some active limited companies later become dormant, others are dormant from incorporation. Here are some of the most common reasons to register a dormant company:

• Protecting a name you’re already using as a sole trader or partnership
• Reserving a company name you want to use later, so no one else registers it first
• Setting up a company in advance of launch, while you make the final preparations needed to start trading
• Keeping a business on the Companies House register during a restructure
• Holding assets or intellectual property so they’re ready for future activity
• As a temporary measure upon the death or illness of a business owner

If you plan to be dormant from day one, you first need to register a UK limited company with Companies House and then tell HMRC that your company is dormant.

Example: Priya registers a dormant company to reserve a name

Priya is planning to launch a subscription meal-prep business next year, but she isn’t ready to trade yet. She’s still finalising suppliers, building the website, and speaking to potential investors. In the meantime, she’s worried someone else might register the name she’s been using in her pitch deck.

To protect it, Priya works with a company formation agent to register a limited company with that name. As soon as she gets her certificate of incorporation, she notifies HMRC that her company is dormant.

This gives her confidence that the name is secured while she prepares for launch, even if this takes longer than planned. There’s no limit on how long a company can stay dormant.

Priya could have set up the company and simply not traded, but she decided to register it as dormant from day one. That way, HMRC had a clear record that the company wasn’t trading or earning any income and wouldn’t need to file a Corporation Tax return. She also minimised the obligations she needed to fulfil for Companies House – but we’ll discuss dormant company filing requirements in more detail later on.

How to make your existing company dormant

Making your previously active company dormant is a simple process. Let’s break it down step by step.

Step 1: Prepare for dormancy

First, make sure that you’ve tied up any loose ends, for example:

• Pay any outstanding bills, taxes and staff wages.
• Cancel all customer and supplier contracts or agreements.
• If applicable, finalise any redundancy processes.

Step 2: Tell HMRC your company is dormant

Sign in to the online service on the GOV.UK website and follow the instructions to tell HMRC that your company isn’t trading and is dormant for Corporation Tax. You can also do this by post or phone. Either way, you’ll need the following information to hand:

• Company name
• Unique Tax Payer Reference (UTR)
• Date the company stopped trading

Step 3: File returns and pay bills

When you tell HMRC that your company is dormant for Corporation Tax, they’ll send a ‘Notice to deliver a Company Tax Return’ to your registered office address. You’ll have to prepare a Company Tax Return, including full annual accounts, and pay Corporation Tax on any profits your company made before it became dormant.

An extra step for VAT-registered companies

If your company is VAT-registered, you must cancel its VAT registration within 30 days of it becoming dormant.

If HMRC is satisfied with the reason for cancelling your VAT registration, you’ll receive a letter confirming the date of cancellation. You then need to submit a final VAT Return and pay your VAT bill for that period.

Legal requirements for dormant companies

Dormant companies must still keep Companies House up to date about any changes, for example, if any of your directors’ details change. They also have a few legal responsibilities to stay compliant and maintain their dormant status. Let’s take a look.

Companies House obligations

You still need to file confirmation statements and annual accounts with Companies House when your UK limited company is dormant.

Annual accounts

You must file accounts with Companies House every year, even if your company stays dormant from one financial year to the next. The good news is that you may be eligible to submit dormant accounts, which are very simple.

You must deliver your dormant accounts no later than 9 months after your accounting reference date (ARD). Your ARD is usually the anniversary of the last day of the month in which you registered your company (unless you change it), and marks the end of your financial year.

For example, if you registered your company in August 2025, your ARD will be 31 August every year from 2026 onwards. That means your annual accounts must always be delivered no later than 31 May.

The exception to this is your first set of accounts, which you only need to deliver 21 months from incorporation.

Annual confirmation statement

All companies, whether active or dormant, must file a confirmation statement at least once every 12 months. It’s simply a way to confirm your company details up to a specific date, known as your ‘confirmation date’. Companies House uses your confirmation statement to help keep the public record accurate and up to date.

Here’s what registered information to include on your confirmation statement:

• Company name
• Company registration number
• Details of shareholders or guarantors
• Standard Industrial Classification (SIC) code(s)
• Statement of capital

The due date for filing your confirmation statement is 14 days from your confirmation date. The confirmation date is usually the day before the anniversary of your incorporation or your previous confirmation statement (whichever is later). You have 14 days from this date to deliver your confirmation statement to Companies House. For example, if the confirmation date on your last statement is 14 August 2025, your next confirmation statement is due for filing on 13 August 2026. It must be delivered to Companies House no later than 27 August 2026.

You still need to submit an annual confirmation statement, even if none of your company’s registered information changes from one year to the next. If any of these details change, you should tell Companies House when you next file a confirmation statement.

You can report company changes and deliver confirmation statements via Companies House WebFiling service or the Rapid Formations Online Admin Portal.

HMRC obligations

Once you’ve told HMRC that your company is dormant and taken care of any remaining tax returns or payments, you won’t have any other obligations as long as your company stays dormant.

Do dormant companies pay Corporation Tax?

If your company is dormant for the entire financial year, you won’t have any Corporation Tax to pay for that period, and HMRC won’t usually require annual accounts or a Company Tax Return.

However, if your company starts trading at any point during the year, you may need to pay tax on any taxable income earned while it was active. You’ll also need to prepare company accounts and submit any relevant tax returns for that period. This is also true if your company became dormant partway through the financial year.

For example, let’s say your company’s financial year runs from 1 April 2025 to 31 March 2026. You trade as usual until 30 September 2025, then stop trading and remain dormant from 1 October 2025 onwards.

In this scenario, you may still have Corporation Tax to pay on any taxable profits earned between 1 April and 30 September 2025. You’ll also need to prepare accounts and submit the relevant Company Tax Return covering the period when the company was active. The fact that the company was dormant from 1 October 2025 to 31 March 2026 doesn’t exempt it from the overall filing requirements for the year.

How to reactivate a dormant company

Restarting a dormant company is a simple process of telling HMRC that you’ve started trading again, then resuming the normal tax and filing duties required of an active limited company in the UK.

If you expect your annual business turnover to exceed £90,000 (the VAT registration threshold) during a 12-month rolling period, you must also register for VAT. If you employ anyone, you’ll have to register as an employer with HRMC and enrol for Pay As You Earn (PAYE).

How to activate a dormant company for the first time

If your company has been dormant since incorporation but has now started trading, you must add Corporation Tax services to your online business tax account. In effect, this is how you tell HMRC that your company is now active. Here’s how:

1. Sign in to your business tax account
2. Go to the left menu and select ‘Services you can add’
3. Go to Corporation Tax and select ‘Enrol for service’

You’ll need the following details to hand:

• Your company registration number (CRN)
• The date you started trading
• Your account reference date (ARD)
• Your company’s Unique Tax Payer Reference (UTR)

Going forward, you’ll need to keep up with your tax and filing responsibilities as an active limited company. If you’re unsure about any part of these responsibilities, it’s worth speaking to an accountant or professional tax adviser sooner rather than later.

Thinking about making your company dormant?

A dormant company can be a helpful way to keep a limited company in place without trading, whether you’re reserving a name, preparing for launch, or taking a break from business activity. The key is to protect your dormant status by avoiding any income or spending, and to stay on top of Companies House basics, such as dormant accounts and confirmation statements.

Need help setting up or maintaining your dormant company? Rapid Formations has over a decade of experience supporting UK business owners at every stage. Explore our dormant company services and compliance services to find the right support for you.