Compliance

What is Dormant Company?

A dormant company is one that has no significant accounting transactions during the year. It still exists but isn't actively trading.

Example

You incorporated a company but haven't started trading. It's dormant until you begin business activities.

Key Dates

Still must file confirmation statement and dormant accounts

How Dormant Company Works in Practice

A dormant company is a limited company registered at Companies House that has had no 'significant accounting transactions' during its financial year. The definition differs slightly between Companies House and HMRC. For Companies House, a company is dormant if it has had no transactions other than filing fees, penalties, and shares issued on incorporation. For HMRC, a company is dormant for Corporation Tax purposes if it is not carrying on business, not receiving any income, and has no chargeable gains.

There are several legitimate reasons for keeping a dormant company. You might have registered a company name you intend to use later. You might have ceased trading temporarily but plan to resume. You might be holding intellectual property or assets without actively trading. Or you might have a subsidiary company that exists solely for group structure purposes.

Even though a dormant company is not trading, it still has legal obligations. You must file a Confirmation Statement with Companies House every year (£34 online). You must file dormant company accounts (known as AA02 form if eligible for total exemption). You must keep the registered office address up to date and maintain statutory registers. You must also respond to any correspondence from HMRC.

For Corporation Tax, you should tell HMRC when your company becomes dormant. HMRC will then make your company dormant for CT purposes, and you will not need to file Corporation Tax returns while it remains dormant. However, you must tell HMRC again when the company resumes trading.

Step by Step

When a company first incorporates without trading, or when it stops trading, it becomes dormant. You should notify HMRC that the company is dormant by writing to your local Corporation Tax office or calling the HMRC helpline. They will note the company as dormant and suspend the requirement to file CT600 returns.

For Companies House filings, a dormant company must still file accounts annually. If your company qualifies as a micro-entity (and most dormant companies do), you can file a simple balance sheet with a statement that the company was dormant throughout the period. This is a very straightforward filing - essentially a balance sheet showing share capital and possibly a small amount of cash.

If the company starts trading again or receives income, it ceases to be dormant. You must notify HMRC within three months of the start of your new accounting period. HMRC will then expect Corporation Tax returns going forward. Companies House will expect full (non-dormant) accounts from the next filing date.

Practical Tips

  • Set a calendar reminder for your Confirmation Statement and dormant accounts filing dates - the penalties for late filing apply equally to dormant companies
  • Notify HMRC promptly when your company becomes dormant and again when it starts trading to avoid unnecessary correspondence and penalty notices
  • Review your dormant company annually and decide whether to keep it or apply for strike-off - do not let dormant companies accumulate forgotten
  • If you are protecting a company name, check whether a trademark registration might be a more cost-effective alternative to maintaining a dormant company

Common Mistakes to Avoid

  • Assuming a dormant company has zero filing requirements - you must still file a Confirmation Statement and dormant accounts every year or risk penalties
  • Forgetting to tell HMRC when the company becomes dormant, resulting in HMRC chasing Corporation Tax returns that are not required
  • Making transactions through the dormant company (even small ones) without realising this may trigger a loss of dormant status and requirement to file full accounts
  • Leaving a dormant company indefinitely without reviewing whether it should be struck off - keeping unnecessary companies costs money and creates admin burden

Frequently Asked Questions

Does a dormant company need to file accounts?

Yes. A dormant company must still file accounts with Companies House every year. However, the accounts are greatly simplified - typically just a balance sheet with a dormancy statement. The filing is free and straightforward.

Do I need to pay Corporation Tax on a dormant company?

No. If your company is genuinely dormant with no income or gains, there is no Corporation Tax to pay. You should notify HMRC that the company is dormant so they do not require you to file CT600 returns.

Can I have a bank account for a dormant company?

Yes, but any significant transactions through it (other than filing fees and bank charges) could cause the company to lose its dormant status. Some banks charge fees for dormant company accounts, so check whether keeping it open is worthwhile.

What happens if I do not file for a dormant company?

Companies House will issue late filing penalties, starting at £150 and increasing to £1,500 if the accounts are more than 12 months late. Persistent failure to file can lead to the directors being prosecuted and the company being struck off.

Should I strike off my dormant company or keep it?

If you have no plans to use the company in the foreseeable future, striking it off eliminates the annual filing burden. However, if you want to protect the company name or may resume trading, keeping it dormant is straightforward. Weigh the £34 annual cost against the value of preserving the company.

Source: HMRC Company Taxation Manual CTM01130 - Dormant companies; Companies House guidance on dormant company accounts

Related Terms

Confirmation Statement

A Confirmation Statement (formerly Annual Return) is a yearly filing to Companies House confirming your company details are up to date.

Annual Accounts

Annual accounts are the financial statements your company must file with Companies House each year, showing your financial position.

Strike Off

Strike off is the process of removing a company from the Companies House register, effectively closing it down.

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