Researching company formation online you will find many references to dormant companies. Often, agents try to sell dormant companies as a ‘special service’ or charge extra for services you do not need. The truth is, registering a dormant company is no different to registering any other company.
Once your limited company has been formed and Companies House have informed you of the registration number, you are free to start trading immediately. However, there is no rule to say you have to.
You may have chosen to form the company just to protect the name, or you may need it in place for funding applications. Either way as long as you do not trade through the company it will remain in its initial state – dormant.
Let us clarify one point that is often misunderstood; all companies are dormant when first registered. There is no special ‘dormant company registration’ service. A new company is dormant until it makes its first transaction and buys or sells goods or services.
A company is considered to be active when:
- It carries on any trading or professional business activity.
- Goods are bought or sold with a view to making a profit or surplus.
- It provides services.
- Any income is received.
- Interest is earned.
- It manages investments.
- Staff are employed.
Companies House automatically informs HMRC of all new company formations in the UK. If you do not intend to trade with your new company straight away, or at all, it is your responsibility to inform HMRC of this as soon as possible. When your company is registered HMRC will send you form CT41G and normally include an additional insert for dormant companies. Completing the insert is the simplest way to inform HMRC the company is dormant.
Once the dormant notification has been actioned the Companies House register will be updated and the status will change from ‘Active’ to ‘Dormant’. A dormant company’s name is not available to be registered and is therefore protected.
The company will remain dormant until you meet one or more of the above criteria. Again though, it is your responsibility to inform HMRC that this has changed. You will need to do this within 3 months of becoming active. The register will then be updated again back to active and HMRC will contact you telling you when to pay corporation tax and to file a company tax return.
Even if your company remains dormant throughout its entire existence you will always need to file dormant company accounts and the confirmation statement. The company accounts will be dormant and therefore show no movement and the only asset in the company should be the initial shareholding. For many companies this is just £1, but please check your incorporation documents. The confirmation statement is a snap shot of the company submitted once a year. This shows any changes in officers, addresses, shareholding or persons of significant control. This is unlikely to change much in the case of a dormant company except for the occasional address change.
Submitting accounts and the confirmation statement is the responsibility of the company director(s). However, this can be outsourced by the directors to an agent, like Simple Formations, who can take care of this on a yearly basis.
For assistance registering a dormant company, or advice on filing your dormant accounts and other company forms, do not hesitate to contact us.