Ainsworth & Co, Chartered Accountants and Business Advisors.

Our Guide to Dormant and Non-Trading Companies


Guide to what "Dormant" and "Non-Trading" means for a Limited Company

This guidance applies to small companies only.



Introduction


• The defintions of "dormant" and "non-trading" are not the same.

Companies House and HMRC have different definitions and regulations for the terms "dormant" and "non-trading".

• When a limited company is first "incorporated" Companies House automatically informs HMRC. However, as at October 2016, no further information passes between them on the subject of dormancy and trading / non-trading.

• It is the responsibility of the company's Directors to inform Companies House and HMRC of any changes to the dormancy and trading status of the company.

• If a trading company now wants to become dormant / non-trading, the directors must:
     > Inform HMRC
     > File annual Dormant Accounts with Companies House
     > File the annual Confirmation Statement with Companies House plus a £13 fee

• Link to GOV.UK: Dormant companies


HMRC Regulations


HMRC has the following definitions and regulations:

• A limited company is dormant from the day the company is first incorporated at Companies House to the day before the company starts trading.

• For this first period (no matter how long) when the company remains dormant for HMRC, there are no requirements to file Annual Accounts or Corporation Tax returns.

• Traditionally HMRC assume that a company is dormant unless the company's directors inform HMRC that the company has started trading. However, in recent years, HMRC have experimented with assuming instead that the company is trading from the outset. HMRC will write to the Directors at the company's Registered Office if HMRC is expecting Acccounts and Corporation Tax to be filed.

• The company's Directors must inform HMRC that a company has started trading within 3 months.

• Once a company has started trading, but then stops trading, for HMRC the company can be classified as "non-trading". The GOV.UK Webpage uses the term "Dormant for Corporation Tax" but technically it is now "non-trading". The company's Directors must inform HMRC if a company becomes non-trading, otherwise the company will be assumed to be trading, and all the filing requirements remain in place.

• HMRC will allow a company to be classified as non-trading for a period of up to 5 years. The company will not be required to file Accounts or Corporation Tax for this non-trading period.

• This is a link to GOV.UK: HMRC guidance on Corporation Tax: trading and non-trading

• No fee is paid to HMRC for dormant and non-trading accounting periods.


Companies House Regulations

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More Information About
Limited Companies


Companies House


Companies House is the home and registration place for all companies in England and Wales.
Companies House Link


GOV.UK


The UK Government is building a substantial website of information for businesses:
GOV.UK Link


Our Webpages:


Limited Company Formation

Setting Up A Limited Company

Shareholders' Guide

Directors' Guide

Director's Loan Account

Annual Accounts

Getting Paid from your Company

Limited Company Bookkeeping

Dividends

Limited Company Taxes

Confirmation Statement

Dormant Companies

Stationery