What is a dormant company?
A dormant company is a registered company that is not trading and has no significant accounting transactions during its financial year.
What a dormant company means
A limited company is dormant when it is not doing business and has no significant money going in or out. Companies are often dormant because they were set up to protect a name, are waiting to start trading, or have stopped trading but have not yet been closed.
Companies House and HMRC use slightly different definitions. For Companies House, a company is dormant if it has had no significant accounting transactions. A few things are ignored, including paying the Companies House filing fee and money paid for shares when the company was formed. For HMRC, a company is dormant for Corporation Tax if it is not trading and has no other taxable income, such as interest.
What you still have to do
- File a confirmation statement every year, with the £50 fee
- File dormant accounts with Companies House every year
- Keep the registered office and director details up to date
- Tell HMRC the company is dormant so it stops sending Corporation Tax return notices
If HMRC has already sent a notice to file a Company Tax Return, you must still file one, even if it shows nothing.
Example
A consultant sets up a company in January to start contracting from June. Between January and June it does nothing except pay the incorporation fee. It is dormant for that period, and the consultant tells HMRC it will start trading in June.
A second example: a café owner closes a business in March but keeps the company in case she reopens. Once final bills are paid and the bank account sits untouched, the company becomes dormant. She files dormant accounts and confirmation statements each year, using the SIC code 99999.
Why it matters for your business
Dormant does not mean invisible. Missing a Companies House deadline still brings automatic late filing penalties starting at £150, and repeated failures can lead to the company being struck off. If the company earns even a small amount of bank interest, it is no longer dormant for HMRC and may need a tax return.
If you do not plan to use the company again, applying to strike it off is often cheaper over time than keeping it dormant.
Common questions
Not necessarily. Dormant accounts are simple and many directors file them themselves through Companies House's online service. An accountant becomes useful when the company is about to start trading again, has any unusual transactions, or needs to be closed properly.
No, because it has no taxable profits. You should tell HMRC it is dormant so it does not expect returns. If any income arises, such as interest or a one-off sale, the company is no longer dormant for tax and you must notify HMRC.