What is domrant company UK?

A dormant company in the UK is a registered business that's not actively trading or making money. It's like a parked car - registered but not in use.

Key points:

Registered with Companies House but not doing business
No significant transactions or income
Still has legal obligations

Why go dormant?

Protect your company name
Hold assets without trading
Take a break from business

Legal duties:

File annual confirmation statement
Submit dormant accounts
Tell HMRC you're dormant

Quick comparison:

Aspect	Dormant Company	Active Company
Trading	No	Yes
Income	None	Yes
Tax Returns	Usually no	Yes
Annual Accounts	Simplified	Full
Confirmation Statement	Yes	Yes

Remember: Small transactions can change your status. Stay on top of paperwork to avoid penalties.

What is a dormant company?

A dormant company in the UK is a registered business that's not actively trading or making money. Think of it like a car parked in the garage - it's still registered, but nobody's driving it.

HMRC's take

HMRC says a company is dormant if it:

Stopped trading and isn't earning
Is a new limited company that hasn't started trading
Is an unincorporated association or club owing less than £100 in Corporation Tax
Is a flat management company

Here's the kicker: Dormant companies don't pay Corporation Tax or file Company Tax Returns unless HMRC asks for them.

Companies House view

Companies House sees things a bit differently. For them, a company is dormant if it has no "significant accounting transactions" during the accounting period.

What's significant? Here's a quick breakdown:

OK	Not OK
Filing fees to Companies House	Buying and selling goods
Penalties for late filing	Renting property
Money paid for shares when starting	Advertising
	Employing staff
	Earning interest

Even if dormant, companies must:

1. File annual accounts (simpler than active companies)

2. Submit a yearly confirmation statement

Don't skip these filings. They're needed to stay dormant and avoid penalties.

As of March 2023, over 300,000 dormant companies were registered in the UK. That's a lot of parked cars!

Why companies become dormant

Companies go dormant for a few key reasons:

Protecting their name

It's all about brand protection. Imagine you're a freelancer called "Super Design Co." You might set up a dormant company with that name. Why? So no one else can snag it.

Holding onto assets

Dormant companies can own stuff without actually doing business. This comes in handy for:

Property: Owning buildings or long-term leases
Intellectual property: Keeping patents or trademarks safe

Think about a group of flat owners. They might use a dormant company to collectively own the building.

Taking a breather

Sometimes, businesses need to hit pause. Maybe it's because:

Life happens (health issues, family stuff)
The market's not great
They're planning big changes

Take Sarah. She ran her marketing agency for a decade. But when her mom got sick, she made the company dormant. It gave her time to focus on family and figure out her next move.

Dormancy is like putting your business in hibernation. You're not actively trading, but you're not shutting down either. It's a way to keep your options open without the day-to-day hassle of running a company.

Legal duties

Dormant companies in the UK still have legal obligations. Here's what you need to know:

Yearly paperwork

Two key documents are required each year:

Confirmation statement: Updates Companies House on basic company info.
Dormant accounts: Shows the company had no significant transactions.

Don't skip these filings. Rachel Roberts from Companies House says:

"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."

Key dates:

Confirmation statement: Due yearly, within 14 days of the review date
Dormant accounts: Due 9 months after the financial year-end

Costs:

Confirmation statement: £13 online
Dormant accounts: Free

Dormant company accounts

Dormant accounts are simpler than active ones. They include:

Company name and number
Balance sheet date
Statement of no significant transactions
Director's signature

How to file:

Use form AA02 from the Companies House website
Fill in the details
Submit online or by post

Note: Small transactions can change your company's status. These don't count:

Paying Companies House filing fees
Late filing penalties
Money paid for shares when setting up the company

What dormant companies can do

Dormant companies in the UK can do a few things without losing their status. Here's what's allowed:

Small transactions

Dormant companies can handle some minor money stuff:

Pay Companies House filing fees
Pay late filing penalties
Get money for shares from first shareholders

These don't count as real accounting activities.

Money limits

To stay dormant, companies must follow strict rules:

OK	NOT OK
Pay to set up the company	Do any trading
Pay legal/professional fees	Earn interest
Keep a registered office	Manage investments
Own stuff (like property, IP)	Pay salaries
	Give out dividends

Important: Don't use a business bank account. UK tax advisor Emma Thompson says:

"Dormant companies should handle small expenses through personal accounts. This stops accidental transactions that could mess up dormant status."

Keep in mind:

Close any business accounts if you were active before
Don't hire staff or pay directors
Don't buy, sell, or rent property

Tax rules

Dormant UK companies have tax obligations, even without active trading. Here's what you need to know:

Corporation Tax

Dormant companies don't pay Corporation Tax, but they must:

Tell HMRC they're dormant
Give their name, UTR, and when trading stopped
Only file Company Tax Returns if HMRC asks

You can inform HMRC online, by phone, or mail. Tax advisers can use an agent code.

VAT rules

VAT is simple for dormant companies:

VAT Status	What to Do
Not VAT registered	Nothing
VAT registered	Think about cancelling

If you were VAT registered, it's usually best to cancel. This stops accidental VAT charges that could affect dormant status.

Key point: Dormant companies still file with Companies House:

Annual confirmation statement
Simplified dormant company accounts

"Dormant companies don't file tax returns with HMRC, but must file the annual confirmation statement and accounts with Companies House", says an HMRC spokesperson.

Note: HMRC and Companies House define "dormant" differently. HMRC looks at trading and income, Companies House at significant accounting transactions.

Waking up a dormant company

Ready to revive your dormant UK company? Here's what you need to do:

Starting to trade

1. Tell HMRC you're active

Let HMRC know within 3 months of restarting trade or getting income. Use HMRC Online Services to register for Corporation Tax.

2. Update Companies House

File your next annual accounts as an active company. This shows you're no longer dormant.

3. Create financial statements

Make full financial statements for your new trading activities. Send these to Companies House within 9 months of your year-end.

4. Pay Corporation Tax

If you owe it, pay Corporation Tax within 9 months and 1 day of your year-end.

5. File Company Tax Return

Send your Company Tax Return to HMRC within 12 months of your year-end. Include your statutory accounts.

Task	When to do it
Tell HMRC	3 months after restarting
Send accounts to Companies House	9 months after year-end
Pay Corporation Tax	9 months and 1 day after year-end
File Company Tax Return	12 months after year-end

Keep your accounting reference date the same with Companies House. It makes reporting easier.

Here's an example:

Your dormant company's accounting date is September 30. You restart on May 1. You'll need to:

Make accounts for October 1 to September 30
Send these to Companies House
File a Tax Return for May 1 to September 30 with HMRC

Don't forget to:

Reactivate or open bank accounts
Re-register for VAT if needed
Restart PAYE if you're hiring

"When the company starts trading again you will need to advise HMRC, or your accountant will, and I agree with the above to change the year end if it starts trading again before 31 Jan." - Anonymous Contributor

Common mistakes

People often confuse dormant companies with non-trading companies in the UK. This mix-up can cause big problems.

Not the same as non-trading

Dormant and non-trading companies are different:

Dormant Company	Non-Trading Company
No significant transactions	May have some transactions
No income or expenses	Can have investment income or sales
Doesn't need to file tax return	Must file company tax return
Files dormant accounts	Files full company accounts

Here's what you need to know:

1. Activity level

Dormant companies do nothing. Non-trading companies might do a little.

2. Tax obligations

Dormant companies don't pay Corporation Tax. Non-trading companies might.

3. Reporting requirements

Both file with Companies House, but the paperwork is different.

Watch out for these errors:

Using the wrong forms (it can cost you)
Thinking small transactions don't matter (they do)
Not telling HMRC when you start trading again (do it within 3 months)

Real-life example:

An HS2 contractor thought it was dormant. But a few bank transactions put that in doubt. It's easy to slip up!

"Some companies choose to go dormant. Maybe they've shelved a business idea or want to pause trading for a while." - Roger Eddowes, Business Godparent

Bottom line: Not sure about your company's status? Talk to an accountant. It's cheaper than messing up.

Pros and cons

Keeping a dormant company in the UK has its ups and downs. Let's break it down:

Pros	Cons
Protect company name	Yearly paperwork
Less admin work	Limited activities
Easy to restart	Possible confusion
Cheaper than active trading	Potential brand damage
Keep business structure	Costs without income

The good stuff:

Name protection: Nobody else can snag your business name. Big deal for sole traders building a brand.
Paperwork lite: Dormant companies = fewer forms to fill out.
Quick restart: Ready to trade again? Just tell HMRC within 3 months.
Save some cash: Often cheaper than staying active or closing and reopening later.

The not-so-good stuff:

Still some duties: You'll need to file a yearly confirmation statement and dormant accounts.
Hands tied: No big transactions allowed. Can be tricky to manage.
Mix-up risk: People might confuse your dormant status with a non-trading company. Different rules apply.
Brand worries: Long-term dormancy might make customers and partners raise an eyebrow.
Money out, none in: You'll have some costs to stay registered, but no cash coming in.

Real-world example:

The M Group Holdings case shows how dormant status can impact taxes. If they'd kept their subsidiary dormant for over a year before selling shares, they might've dodged a £10 million tax bill.

"Keep at least two group companies, even if one's dormant. It can help sidestep potential tax headaches." - Tax expert on the M Group Holdings case

Quick facts:

Over 500,000 dormant companies are on the UK's Companies House books.
No time limit on dormancy.
Late filing fines for dormant accounts start at £150, can hit £5,000 for directors.

Bottom line: Think it through. Not sure? Chat with an accountant about your situation.

Common questions

Let's tackle some frequent questions about dormant companies in the UK:

Can dormant companies have bank accounts?

Yes, they can. But there are rules:

No big transactions
No interest or fees
No business activities

If you need to cover small costs, pay them yourself or through another company.

How long can a company stay dormant?

There's no time limit. A company can stay dormant forever if it:

Files annual accounts and confirmation statements
Avoids significant transactions
Tells HMRC it's dormant

Requirement	Companies House	HMRC
Annual accounts	✓	✓
Confirmation statement	✓	-
No significant transactions	✓	✓
No taxable income	-	✓

Even if your company's dormant, you still have legal duties. Don't ignore them!

Some quick facts:

Over 500,000 dormant companies are registered with Companies House
Form AA02 (DCA) is for dormant company accounts
Tell HMRC within 3 months if you start trading again

Dormant doesn't mean forgotten. Stay on top of paperwork to avoid penalties.

Wrap-up

Dormant companies in the UK aren't dead - they're just sleeping. Here's what you need to know:

A dormant company isn't doing business or making money. Both HMRC and Companies House have rules about this. Even when dormant, you still need to file some paperwork:

What to Do	Companies House	HMRC
Annual accounts	Yes	Yes
Confirmation statement	Yes	No
No big transactions	Yes	Yes
Tell them you're dormant	No	Yes

Why go dormant? Maybe you want to:

Keep your company name
Hold onto stuff you own
Take a break from business

But watch out! Small slip-ups can wake your company up. Using a company bank account or earning interest? That could change your status.

To stay dormant:

Pay small costs yourself or through another company
Don't open a business bank account
Keep good records

Ready to start up again? Tell HMRC within 3 months. You'll need to deal with taxes again.

Dormant companies have it easier, but they're not off the hook. Follow the rules to avoid fines and keep your options open.

FAQs

What's a dormant company in the UK?

A dormant company in the UK is a business that exists on paper but isn't doing anything. It's registered with Companies House but doesn't trade or make money. Think of it as a company taking a nap.

How long can a UK company stay dormant?

There's no time limit. A company can be dormant for as long as it wants - a few months, years, or even forever. Just remember to keep filing the required paperwork with Companies House and HMRC.

Do dormant companies need financial statements?

Most don't. If you're a private dormant company with less than £500,000 in assets, you're off the hook. But ALL dormant companies must file an annual confirmation statement with Companies House. It's like a quick check-in to say, "Yep, we're still here!"

What makes a company "dormant" in the UK?

A UK company is dormant if it:

Is registered with Companies House
Isn't doing any business
Isn't making money (not even from investments)

Even though these companies are snoozing, they still have some paperwork to do. It's like having to send a postcard while on vacation.

Here's a quick look at what dormant companies need to file:

What to File	Companies House	HMRC
Annual accounts	Yes (simple version)	No
Confirmation statement	Yes	No
Corporation Tax return	No	Only if previously active

What is domrant company UK?