Limited companies are ‘active’ as soon as they are incorporated at Companies House because they are in existence and able to trade. However, the definition of an active company is broader at HMRC. For Corporation Tax purposes, a company is only considered ‘active’ when it starts carrying on some form of trading activity, such as buying and selling goods or services, managing investments, or receiving income of any kind.
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 company must be registered with HMRC for Corporation Tax, file Company Tax Returns, and pay Corporation Tax at the end of each accounting period.
Active company requirements for HMRC
When you incorporate a new limited company, Companies House will inform HMRC of its existence. Within a couple weeks 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 for Corporation Tax, you must register 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.
If your company is inactive, you will be required to inform HMRC as soon as possible by contacting the Corporation Tax department to state the date on which your company became or will become dormant. This applies to newly formed companies that have never traded, as well as previously active companies that have ceased trading and have 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 with HMRC for Value Added Tax (VAT) and Pay As You Earn (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. You will notify the registrar retrospectively when you file your annual accounts, which must be delivered no later than 9 months (or 21 months for your first accounts) after your company’s accounting reference date (ARD). This date signifies the end of your company’s financial year, which should 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 to update and/or confirm key information about the internal structure of the business, including:
- company name
- registered office address
- SIC codes
- shares capital
- information about directors, shareholders, and people with significant control (PSCs)
The Confirmation Statement should be filed no later than 14 days after the anniversary of company formation or the anniversary of the previous Confirmation Statement. You will be required to complete one every year, regardless of whether your company is active or dormant.
