Dormant Company Formation Guide

How to form a dormant company

We are often asked to form dormant companies for our clients. This is very simple. We just form a normal company. There is no special way of forming a dormant company. All companies are dormant the instant that they are formed. They only stop being dormant when they begin to trade. If a company is buying and selling goods or services then it is ‘active’ or ‘trading’. If a company has not purchased or sold goods or services then it is dormant.

How to keep a company dormant

Documents you will need to file

Summary of how to keep a limited company dormant

Dormant companies – How to keep a company dormant

A common misunderstanding with limited companies is that you need to take action to make them dormant. This is not true and we do not recommend that you pay anyone more money for providing a dormant company. All companies are dormant from the date of incorporation so simply register your company using any company formation service. If a company has not traded they are dormant. A company is deemed to be active (not dormant) when you buy or sell goods through the company. You do not officially register the company as dormant at the time of incorporation.

Some company formation agents claim to sell dormant companies. They may even advertise a special dormant company package. This is a little misleading and they normally charge additional fees to file documents each year. Another gimmick or trick used by some company formation agents is to charge you a fee to either release the company or to make it non-dormant. This again is misleading and we do not recommend that you buy any such service from anyone.

Whilst filing documents for a dormant company may seem daunting at first. In reality it is quite easy if you have the knowledge.

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Documents you will need to file

CT41G – Corporation Tax – New company details
Within a few days of forming a limited company HMRC will write to the company. Simply inform HMRC that your company is dormant and that you will inform them within 3 months if the company begins to trade. This can be done with a basic letter or send the CT41G back with a hand written note stating ‘this company is dormant, we will instruct HMRC within three months if the company starts trading’.

AR01 – Annual Return to Companies House
On the anniversary of the company formation you need to file the Annual Return (form AR01) at Companies House. This is a snap shot of the company structure and declares-
The registered office address
Director details
Secretary details (if appointed)
Share structure (issued shares and share value). This should be stated in your company documents.
Shareholder details
Nature of business. This requires selecting a code from a list. If you are not sure which code to choose for your business then code 7487 states ‘other business activities’

This costs £15 if done online via Companies House website or £30 if you prefer to send the paper version.

AA02 – Dormant Accounts
The company has to file accounts every year even though it is dormant. It does not cost anything to files accounts. However, there are penalties for not filing accounts on time so please ensure that you complete and file the dormant accounts within 9 months of the company’s anniversary. Dormant accounts can be filed using a standard form called a AA02. You can file this form online at Companies House website or post them the paper AA02 form.

CT600 Corporation Tax Return
Companies have to file a corporation tax return each year. If you have informed HMRC that you are dormant then you may not need to file this document. However, it is not unheard of for HMRC to still send out corporation tax returns reminders to dormant companies. To avoid any confusion you can write to them again to advise that no tax return is due as the company is dormant or you could file a dormant tax return for the company. This is simply a few zeros on the standard CT600 form. This should be completed within 9 months of the company anniversary. Do not assume a tax return is not required, if one is requested by HMRC then write to them or file a nil return, failure to do so could result in penalties being issued.

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Summary of how to keep your company dormant

In summary keeping a company dormant requires you to file three documents each year-

- Dormant accounts to Companies House
- AR01 Annual Return to Companies House
- Informing HMRC that there is no corporation tax due as the company is dormant.

File these promptly once each year and you should have no problems. Having completed them once you will find the job quite easy and question why anyone would pay for such a service. However if you are unsure or would prefer assistance then we can assist you with filing the required documents. Please contact us for details of our fees.

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