In the context of limited company formation, a company is active as soon as it is incorporated. However, it is only considered ‘active’ for corporation tax purposes when it is carrying on any kind of trading activity, such as buying and selling goods or services, managing investments or receiving income of any kind, including bank interest.
These kind of trading activities are viewed as ‘significant accounting transactions’ and they must be entered into the company’s accounting records. In such cases, the active business must be registered with HMRC, pay corporation tax and file Company Tax Returns.
Active company requirements for HMRC
When you incorporate a new limited company, Companies House will inform HMRC of its existence. Within a couple weeks or so after company formation, you should receive documentation from HMRC that outlines your obligations and requirements regarding tax. You will also be provided with your Unique Tax Payer (UTR) code. If your company is active, you must inform HMRC by registering for corporation tax within 3 months of carrying on any taxable activity.
You will then be liable to pay corporation tax within 9 months and 1 day after the end of your company’s accounting period and file an online Company Tax Return within 12 months after the end of your company’s accounting period. These dates will be provided by HMRC shortly after you register your company as ‘active’ for corporation tax purposes.
If your company is inactive, you will be required to inform HMRC as soon as possible by contacting your local corporation tax office in writing to tell them the date your company is dormant. This applies to newly formed companies that have never traded, as well as previously active companies that have ceased trading and become dormant. If your company was previously active, you will be required to file a Company Tax Return and pay corporation Tax for the period of activity prior to becoming dormant.
Active companies may also have to register for VAT and PAYE.
Active company requirements for Companies House
Companies House does not need to be informed straight away if your company is active for corporation tax. They will be informed retrospectively when you file a full set of annual accounts within 9 months (or 21 months for your first accounts) of your company’s accounting reference date (ARD). This date signifies the end of your company’s financial year and it will normally fall on the anniversary of the date of incorporation.
Dormant companies should prepare dormant company accounts for Companies House. This is how you will inform Companies House that your business has not yet started trading or has ceased trading.
Both dormant and active companies must submit an annual confirmation statement to Companies House each year to update and/or confirm key information about the internal structure of the business, such as the company name and registered office address, SIC codes, shares, and information about all directors, shareholders and people with significant control (PSCs).
This statement should be filed no later than 14 days after the anniversary of company formation or the anniversary of the previous annual return. You will be required to complete one every year, regardless of whether your company is active or dormant.