In this blog, we will explain how a dormant company can be made active, allowing the owners to resume trading. But first, let’s have a recap of the meaning of a dormant company.
What is a dormant company?
A dormant company is one that is not carrying out any business activity or receiving an income. The definition of a dormant company is slightly different for the purposes of HM Revenue and Customs (HMRC) and the registrar of companies, Companies House. According to HMRC, a dormant company is one which:
- has stopped trading and has no other income, such as investments
- is a new limited company that hasn’t started trading yet
- is an unincorporated club or association run for the benefit of its members, and owes less than £100 Corporation Tax
- is a flat management company
The Companies House definition of a dormant company is one that has had no significant accounting transactions during its most recent financial year. So it can’t have generated income or earned bank interest during this time.
How can I make my dormant company active again?
The company directors must inform HMRC if their dormant limited company starts trading again. This should be done within three months of the date from which the company starts to trade again or receive an income. Statutory accounts and the company tax return will also need to be prepared. The steps for restarting a dormant company are:
- Corporation tax registration – the directors should inform HMRC that the company has resumed trading by registering for Corporation Tax.
- Accounts – company accounts should be sent to Companies House within 9 months of the company’s accounting reference date.
- Corporation tax payment – any corporation tax due needs to be paid within 9 months and 1 day of the company’s accounting reference date.
- Tax return – a company tax return should be submitted to HMRC within 12 months of the company’s accounting reference date.
Please note: If the dormant company has never traded before, it must first be registered with HMRC before it starts trading.
There is no need to specifically inform Companies House if a dormant company resumes trading. This is because the next set of statutory accounts will show that the formerly dormant company has been reactivated.
What are the filing deadlines when making a dormant company active?
Even when a company is dormant, the directors are required to submit annual statutory company accounts to Companies House. In addition, an annual confirmation statement needs to be filed. Therefore, the deadlines for submission of statutory accounts and confirmation statements remain the same when a dormant company is restarted.
But the deadline for submission of corporation tax will change when a dormant company is made active. The accounting period will begin again when the company resumes trading. However, it is possible to align the Companies House accounting reference date and the end of the Corporation Tax accounting period by:
- keeping the company’s accounting reference date the same with Companies House
- preparing statutory accounts as usual for the 12 months up until the accounting reference date
- sending accounts to Companies House and using them to complete the Company Tax Return
Here is an example of how this would work:
- The dormant company’s accounting reference date is 30 September. Trading resumes on 1 May.
- A set of statutory accounts are created for the usual period, from 1 October to 30 September.
- The statutory company accounts are sent to Companies House.
- The company tax return for the period 1 May to 30 September is sent to HMRC.
- Statutory accounts and a company tax return will then need to be completed from 1 October to 30 September each year.
If I make my dormant company active, can I make it dormant again?
Yes. Even if a dormant company is activated, it can be made dormant again. Companies House does not need to be informed regarding the change in status from dormant to active or vice versa. However, it is necessary to let HMRC know of the change in status as soon as possible – or within three months of being made active.
HMRC does not require dormant companies to pay any tax while they are considered dormant by HMRC. Nor is there any requirement to submit company tax returns while the company is dormant.
Annual statutory accounts must be filed with Companies House even if a company is made dormant. However, it does not have to file full accounts. It is only required to file a simplified version of accounts, which are known as dormant company accounts.