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What is a Dormant Company?

Posted 15 Sep 15

A dormant limited company is a company that has been registered with Companies House, but does not have any ‘significant accounting transactions’ during the accounting period.

‘Significant accounting transactions’ are those transactions which are associated with trade and do not include payments for shares by subscribers to the Memorandum of Association, fees paid to the Register of Companies for a change of company name, the re-registration of a company and filling annual returns and payment of penalties in case of filing for self-assessment after the statutory time allowed.

Under the Companies Act, there are exceptions for certain types of business, such as some financial and insurance companies who are required to file their full accounts, regardless of their status; however, in this article, we will only focus on the most common circumstances in which a company can be considered dormant.

A company can be dormant from the moment of its incorporation, but it can also become dormant after a period of activity. There are many reasons why owning a dormant limited company can be useful for you. If, for example, you are still in the process of preparing your business for launching and you’d like to reserve the company name, registering it with Companies House is the best option to guarantee it.

If you own a business, but for some reason (illness, maternity or paternity leave, travel or starting another company), would like to put it on hold and re-launch it in future, claiming it dormant will allow you to preserve it without worrying about starting up from the very first step.

A company can remain dormant for any length of time. However, before you stop trading, you need to inform your local Corporation Tax Office, as well as maintain certain obligations towards Companies House, including registering for self-assessment, filing annual tax returns and dormant accounts.

You need to report any changes related to the registered company, and keep all the information and records accurate, up-to-date and accessible for a public investigation.

If you want to register your new company as dormant or turn existing company into one, you must contact your local Corporation Tax Office in writing, stating the date from which it has been or will become dormant.

Within two weeks, you should receive a notification from HMRC that states your company’s new status.

Keeping a dormant company should not be stressful. However, a lot of business owners forget to take care of the companies once they stop trading. In order to avoid any fines related to missing HMRC deadline or failing to provide it with required documents, we recommend you hire a professional and certified accountant, who will take the burden of paperwork off you.

At Tawanda Accountants we make sure our clients never worry again about the self-assessment period. We discuss our client's need before advising them on the offer which best fits their individual requirements. If you are a company owner who is thinking about turning your company dormant, contact us and find out what benefits you can get from owning a dormant company.