Dormant Company Status Verification: 6 Key Steps

Want to check if a company is truly dormant? Here's how in 6 steps:

1. Check company records
2. Meet regulatory rules
3. Handle tax duties
4. Review legal status
5. Assess financial health
6. Consider dormancy duration

Quick comparison of active vs dormant companies:

Remember: Even dormant companies have obligations. They must file annual returns, keep a company secretary, and may need to file tax returns. Stay compliant to avoid penalties and maintain dormant status.

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1. Check company records

To confirm a company's dormant status, start with its records. This helps you stay legal and avoid tax issues.

Look at financial statements

Check these key financial documents:

1. Income statement: No revenue or expenses
2. Balance sheet: Minimal changes from last year
3. Cash flow statement: No big cash movements

Here's a quick breakdown:

Check for business activities

Make sure the company hasn't done anything to change its dormant status, like:

• Buying or selling stuff
• Renting property
• Hiring people
• Paying directors

"Some directors think that because HMRC may not require accounts from a dormant company, the same applies to Companies House. This is not the case." - Rachel Roberts, Companies House

But don't worry about:

• Filing fees to Companies House
• Late filing penalties
• Money paid for shares when incorporating

These won't affect dormant status.

2. Meet regulatory rules

Keeping a company dormant isn't just about doing nothing. You've got to follow some rules. Here's what you need to do:

File annual returns on time

Every year, you need to send stuff to Companies House. It's not optional - skip it, and you'll face fines.

"Don't assume Companies House doesn't need accounts just because HMRC might not. They do." - Rachel Roberts, Companies House compliance chief

Send in dormant company accounts

You need to prove your company's still sleeping. Use form AA02 and include:

• Company details
• Balance sheet date
• Net assets confirmation
• Directors' sign-off

Small dormant companies? You can skip the auditor's report.

Have enough directors

Make sure you've got the right number of people at the helm:

And don't forget:

• Board meetings every six months
• No more than 90 days between meetings

Keep these rules in mind, and your dormant company will stay on the right side of the law.

3. Check tax duties

Dormant companies might still have tax obligations. Let's break it down:

Unpaid taxes

Check for outstanding:

• Corporation Tax
• VAT
• PAYE

Unpaid taxes? Your company might not be truly dormant. In South Africa, SARS slaps a R250 penalty per late return, per month. Ouch!

Tax returns

Think dormant companies don't file tax returns? Not so fast:

1. Corporation Tax (UK)

If HMRC says you're dormant:

• No Corporation Tax
• No Company Tax Return

BUT: If they ask for a return, file it to prove you're dormant.

2. VAT

VAT-registered? You've got options:

• Deregister within 30 days if you're done trading
• Send 'nil' returns if you might restart

3. PAYE

Have employees?

• Close your PAYE scheme if you're not restarting this tax year

4. Income Tax Return (Singapore)

Want a waiver? Apply via myTax Portal. But you need to:

• Be dormant
• Have filed up to your business cessation date
• Own no income-generating investments
• Plan to stay dormant for 2+ years

"Companies House still needs accounts, even if HMRC doesn't." - Rachel Roberts, Companies House compliance chief

Remember: Always file annual accounts and an Annual Confirmation Statement with Companies House.

Tax rules vary. When in doubt, ask your local tax authority or an accountant.

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4. Look at legal status

Checking a dormant company's legal status is key. Here's what to focus on:

Check for ongoing investigations

Look for any legal issues:

• Search public records for lawsuits, liens, and bankruptcies
• Check regulatory databases like Companies House (UK)
• If in doubt, review criminal records

"Companies House still needs accounts, even if HMRC doesn't." - Rachel Roberts, Companies House compliance chief

Check for management disagreements

Internal conflicts can mess up dormant status:

• Director disputes might lead to unexpected activities
• Shareholder conflicts could cause unplanned transactions

Before confirming dormant status or striking off, fix all issues. Tell creditors and settle debts.

A real case shows why this matters:

In WRB (NI) Ltd. v Henry Construction Projects Ltd. [2023], a court backed a dormant company in a dispute. It proves you need to double-check who you're dealing with, especially dormant companies.

5. Check financial health

Checking a dormant company's finances is crucial. Let's focus on two key areas:

Loans and deposits

Any financial activity can end dormant status. Here's what to do:

• Check all bank accounts for transactions
• Look for outstanding loans or credit lines
• Watch for any deposits

In 2023, Leo Bernard Stanley of Ink Edibles Ltd claimed a £50,000 Bounce Back Loan while dormant. Result? Lost dormant status, director disqualification, and liquidation with £32,156 unpaid.

Unpaid legal fees

Unpaid legal fees can cause headaches. To avoid them:

• Review past legal invoices
• Check for ongoing legal services
• Pay all outstanding legal bills

Remember: Companies House needs dormant companies to file annual accounts and a confirmation statement, even with zero activity.

6. Check how long it's been dormant

The duration of a company's dormancy matters. It affects your next steps, even though there's no time limit on being dormant.

Stay dormant or restart?

Companies go dormant for various reasons. Maybe you're taking a break, protecting a brand name, or waiting for better market conditions.

But eventually, you'll need to decide: keep sleeping or wake up?

If you're sticking with dormancy:

• Keep filing those annual accounts and confirmation statements
• Don't do any big accounting moves
• Shut down bank accounts to avoid accidental activity

Thinking about restarting?

• Tell HMRC within 3 months of making money again
• Sign up for Corporation Tax
• Send accounts to Companies House within 9 months of your year-end

HMRC says: "If your non-trading or dormant company starts trading again, you must tell HM Revenue and Customs (HMRC)."

Here's a quick look at dormant vs. restarting:

Before you decide, think about:

• How has the market changed?
• Any new laws in your industry?
• What's the economy like now?

Ask yourself:

• Is a new company better than restarting the old one?
• Are all your old filings up to date?
• Have you checked for new rules during your dormancy?

Wrap-up

Verifying dormant company status? It's not as simple as it sounds. Here's what you need to do:

1. Check company records

No business activities or financial transactions should be present.

2. Meet regulatory rules

File annual returns and dormant company accounts on time. No exceptions.

3. Handle tax duties

Pay all taxes and file necessary returns. Even dormant companies can't escape this.

4. Review legal status

Make sure there are no ongoing investigations or management disputes.

5. Assess financial health

No loans, deposits, or unpaid legal fees should be lurking around.

6. Consider dormancy duration

Decide if you want to stay dormant or get back in the game.

Even when your company's snoozing, it's got responsibilities. For instance:

"A dormant company must continue to file its Form C-S / C with IRAS, even if it has no income."

To stay on the right side of the law:

• File annual returns within 7 months after your financial year ends
• Keep a qualified company secretary (they're not just for show)
• See if you can get tax filing waivers (hey, it's worth a shot)

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