Dormant and Non-trading limited companies

Dormant Companies and Non-trading Companies are one and the same thing:

There is no statutory definition of a non-trading company, furthermore Companies House and HMRC define dormant companies differently:

  • Companies House state that a company is dormant if it has made no significant transactions during an accounting year.
  • HMRC consider a company to be dormant, if:
    • The company is not actively engaged in business or receiving income or profits.
    • The company holds assets that are not capable of generating income or profits
    • The company’s assets are unlikely to produce income or profits in the near future.
    • The company is not incurring costs, other than incidental compliance costs i.e. Companies House Charges
    • The company is an investment trust, pension or client account company and is not trading.

Dormant Companies are usually created for the following reasons:

  • To protect a name: Companies House will not register a company with a name that is already registered. Registering a name first pre-empts another limited liability company or limited liability partnership registering that name. Registration is a relatively inexpensive way to protect a name, but not foolproof.
  • To hold a non-performing asset: Such as a freehold or a patent.
  • In readiness to start trading: Limited Companies are quite often put “on-ice” until their directors are ready to start trading.

Dormant Companies have legal compliance obligations.

Companies House requires an Annual Return each year and dormant company accounts in respect of each accounting year. Annual Returns can be submitted via the administrative portal we provide our clients. We also have a service preparing and submitting dormant company accounts. For more information use our contact us form.

  • The Annual Return must contain the following information:

  • The Dormant company accounts must contain the following information:

    • A balance sheet with notes and a statement that the company was dormant for the entire accounting year.
    • The previous year’s figures

HMRC sends new companies a form CT41G to notify them of their UTR (Unique Taxpayer Reference). The form also asks for more information about the company and includes a section on dormant companies. Directors should use this to advise HMRC that the company is dormant. Dormant Companies are not obliged to file Corporation Tax returns each year. However, directors are obliged to advise HMRC when a dormant company changes its status and starts trading.

tipIf you are forming a company with the intention of keeping it dormant make the shares unpaid. This will ensure that you do not need to open a bank account and incur potential bank charges.It is possible that the bank charges result in the company losing its dormant status.

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