Dormant Company Accounts

 

Question, I have a question about dormant company accounts – I am a limited company contractor and I am the sole shareholder and director of my company. I am about to stop contracting to take up a full time employed role. I don’t want to close my company but would instead like to keep it dormant so it is ready to use again in the future if I return to contracting.

Can you explain how I go about making it dormant and let me know what returns will need to continue to be filed with HMRC and Companies House?

Dormant Company Accounts

Answer, Jan 2017

Many companies in the UK are classed as dormant. This is normally for a number of reasons ranging from the company being registered to hold a specific name or trademark without any intention to trade in the short/medium term, through to the situation you describe yourself in.

The first thing you will need to do once you have ceased trading is to get up to date with the relevant filings with HMRC and Companies House by submitting your corporation tax return and accounts up to the date you ceased trading or the period end thereafter.

After this point you should let HMRC know that the company is now dormant, this can be done either over the phone or via letter. Once HMRC have on record that the company is indeed dormant they will no longer send out a notice to file a corporation tax return unless you tell them otherwise. This step is important as failure to let HMRC know alongside not filing future corporation tax returns would lead to fines starting at £100 and increasing quickly.

If the company commences trading again you will have to speak to HMRC again so they are aware for corporation tax purposes.

If the company was VAT registered whilst it was trading there is also the requirement to de-register for VAT, this is a fairly straight-forward process and can be achieved by completing an online form on HMRC’s website or by posting a VAT7 form to HMRC. It normally takes a few weeks for HMRC to confirm you are no longer registered and hence are no longer required to file VAT returns.

Unlike the VAT position noted above you do not necessarily have to notify HMRC in regard to PAYE. If you are fairly certain that you will trade again through your company, you do have the option to continue running the PAYE scheme by filing nil returns with HMRC. This is probably the best course of action if the dormant status of the company is likely to be a short-term measure. If the company is to remain dormant for a longer period of time we would recommend closing down the scheme. This is normally achieved through a submission via your payroll software.

To remain a dormant company and to avoid any companies house fines you will still need to file a confirmation statement (formerly the annual return) and the company’s abbreviated accounts with companies house on an annual basis.

The company will remain dormant so long as it does not have any significant accounting transactions. This is quite important as even a cost as simple as a bank charge or an accountancy fee booked through the company accounts can be enough for the company to lose its dormant status with Companies House.

As such we would probably recommend the directors/shareholders pay any costs out of their own pocket during this period so as to remove any accounting entries.

If the company is to remain dormant for a significant period it may be of benefit to close the company bank account, especially if this is likely to accrue unnecessary bank charges.

The director may still have a requirement to file a personal tax return whilst the company is dormant should HMRC have issued a personal return for any given period.

As with all areas of tax and accountancy there can be hidden complexities with dormant company accounts and the above is only an overview of the major points. If in any doubt we recommend seeking the advice of a qualified and experienced accountant.