Often people resort to forming a dormant company in order to protect a chosen brand name or trademark, for corporate restructuring, reserve a company name for future use, hold assets or intellectual property, etc. There are numerous businesses opting for or switching to being dormant these days making it a prevalent option in the industry. So, it becomes important to understand the compliances that are required to be done by a dormant company.
The compliance requirements for a dormant company are very simple and lessen a considerable amount of costs and efforts required in maintaining the company. These have been discussed in the article.
Dormant Companies For Companies House
A company is called dormant if it had no ‘significant transaction’ in a financial year. If a company pays filing fees to Companies house, penalties for late filing of accounts, and/or money paid for shares when the company was incorporated; then such transactions shall not amount to significant transactions and so the company shall still continue to be a dormant company.
The company needs to inform HMRC about its dormant status over the phone or by post. It needs to file annual accounts and confirmation statements with Companies House.
Annual accounts: The dormant company needs to file its accounts within 9 months from an accounting reference date (ARD). Its accounts shall include only a balance sheet and relevant notes. This can be filed to Companies House via post or online using form AA02.
Confirmation statement: The purpose of filing a confirmation statement is to confirm that the key company details in the records with Companies House are up to date and accurate. The contents of the confirmation statements include the company’s name, registered office address, director’s details, shareholder’s details, nature of business activities, etc. It needs to be filed within 12 months from the accounting reference date (ARD). Practically, as the company is dormant there might not be any major changes in these details too.
If the company is dormant according to Companies House and also qualifies as ‘small’ then:
- ‘Dormant accounts’ can be filed instead of regular accounts
- An auditor’s report need not be included with accounts
Dormant Companies For Corporation Tax
A company shall be considered to be dormant if:
- It has stopped trading and has no other income like investment income, rental income, etc.
- It is a new limited company that hasn’t started its business.
- It’s a flat management company.
- It is an unincorporated association or club owing less than £100 corporation tax.
Corporation Tax Return-CT600: Since there haven’t been any significant transactions in the financial year, nor the company has been trading, thus, prima facie there isn’t any need for paying Corporation Tax and filing CT600 to HMRC.
A dormant company is a savior to protect people from the hassle of filing requirements of an active company when in reality; it isn’t trading or carrying on any significant transaction in a year. The compliance requirements are simple, thus it a good idea to begin with a dormant company until the business grows.
We can help you file your dormant company’s accounts as well as the confirmation statement. Click here to know more.