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The Complete Guide to Dormant Company Accounts and HMRC Corporation Tax Returns

A dormant company is a great way to hold the reserve a name you like for a Company you plan to use if you’re an entrepreneur or as your small business grows.

But even if you haven’t traded through your Limited Company there are still Companies House and HMRC filing requirements and deadlines. 

Miss them and you’ll face automatic penalties.

I put this guide together to help small business owners, like me, stay on the right side of the rules and help you avoid any fines.

What is a Dormant Company?

Let’s start with the basics.

A dormant company is defined by both HMRC and Companies House as an incorporated business which has no significant transactions. 

That means: 

  • NO trade
  • NO income
  • NO business expenses
  • NO bank account

There are some transactions associated with your Limited Company that are OK to incur to keep dormant status. These include:

  • filing fees paid to Companies House
  • penalties for late filing of dormant company accounts
  • late filing penalties for HMRC corporation tax return
  • money paid for shares when the company was incorporated

If you have paid for any other expenses or received any income then this may jeopardise the dormant status and require the submission of full statutory accounts and HMRC corporation tax return.

HMRC goes a little further with its definition of Dormant Company status meaning your company must be:

  • a new company that’s not yet trading
  • an ‘off-the-shelf’ or ‘shell’ company held by a company formation agent intending to sell it on
  • a company that will never be trading because it has been formed to own an asset such as land or intellectual property
  • an existing company that has been – but is not currently – trading
  • a company that’s no longer trading and is destined to be removed from the Companies Register

Your company can still undertake some initial pre-trading activities and still have dormant status but it must not be engaged in any business activities or trade. So that’s the times like when you are still negotiating contracts, researching the market and preparing your business plan. You can also spend some preliminary money to help you decide whether you should start your business. 

If you are self-employed or a sole trader and trading under your own name then you are not incorporated.  If you or a professional on your behalf has formed a company that uses the suffix Ltd or LLP, then you have an incorporated business.

You can check whether you have an incorporated business by heading over to the Companies House website and using their Online Company Checker.

Why Do People Own a Dormant Company?

Many businesses and individuals choose to open a Dormant Company even though they need to file paperwork with Companies House and HMRC. 

Some of the common reasons that I been asked to form a dormant company by my clients in the past include: 

  • to reserve a company name while preparing to launch a business officially;
  • retaining a company name for a previously active business;
  • to help a business owner who is temporarily stopping trading and needs an extended period of time off due to illness, maternity leave or travel but they want to come back to it in the future;
  • the owner of a business is planning to open up multiple businesses or forms of income they want to account for in different companies.

There is no restriction on the number of Dormant Companies a person can form and own. But the rules apply to each company individually.

What are the Companies House & HMRC Dormant Company Requirements?

Once you have checked that your company is dormant, the next step is to make sure you meet all the filing deadlines.

Here’s a summary of what you need to do:

  1. File Dormant Company Accounts (either online or by printing off an AA02 Form) annually with Companies House;
  2. File a Confirmation Statement annually with Companies House;
  3. File an HMRC Corporation Tax Return annually or notify them of dormant company status.

Guide: How to File Dormant Company Accounts

Dormant Company Accounts

Dormant Company Accounts refer to the paperwork you need to file with Companies House summarising important details about your Limited Company.

There is certain information about your company that is present regardless of whether you have traded or not.

When Should You File Dormant Company Accounts?

The accounts for your dormant company must be filed with Companies House 9 months after the end of the financial year.

For example:

If your company financial year ends on 31 December 2019 then you must file your accounts by 30 September 2020.

Don’t miss the deadline. There is an automatic £100 penalty for missing it and Companies House don’t give much room for appeal on this.

AA02 Form

The form you will need to fill out is called an AA02. This is produced by Companies House and is a template for all the important information you need to disclose each year.

What Does an AA02 Form Look Like?

An AA02 Form for Dormant Company Accounts contains information such as:

  • Company name;
  • Company number;
  • Share capital;
  • Share types.

Here’s what an AA02 Form looks like >>

How to Fill in the AA02 Form for a Dormant Company

You can download and fill in the AA02 form and send back a signed copy to Companies House at:

The Registrar of Companies,
Companies House,
Crown Way,
Cardiff,
CF14 3UZ.

One AA02 form relates to one financial year. So that means you’ll need to submit one every year on an ongoing basis, as long as your company is in existence.

Guide: How to File Dormant Company Accounts

Completing Your AA02 Form Online

Completing your AA02 online is usually easier and quicker, although the online version of the form looks slightly different to the paper one.

You’ll need to use the service known as Companies House Webfiling and need your Company Authentication Code as well as an online account.

Can I Give You a Dormant Company Accounts Example?

It’s really hard for me to give you a dormant company accounts example. That’s because each company listed on Companies House has different owners, directors and setups.

However, what I can say is that every set of dormant accounts must include a Balance Sheet and Directors Declaration.

Guide: How to File Dormant Company Accounts

Dormant Company Tax Return

You’ll need to handle corporation tax returns as part of having a Dormant Company. Of course, with no trade or expenses, there will be no corporation tax to pay.

HMRC will probably post you a Notice to Deliver a Company Tax Return. This is a letter which acts as a reminder to send in a corporation tax return. 

I know this brown envelope tends to terrify people but there is really no need to panic. You just need to make sure you either file a dormant company tax return as requested or notify HMRC about dormant company status.

Why You Need to Inform HMRC of Dormant Company Status

You need to notify HMRC of dormant company status because their default assumption is that every company registered at Companies House needs to submit a corporation tax return and pay tax. 

So whether you have formed a new Company or own a Company that has gone from trading to dormant, HMRC will be expecting a tax return.

That’s means it’s down to you to tell HMRC your company is dormant.

If you do not file the expected tax return on time, HMRC will issue an automatic £100 penalty.

Guide: How to File Dormant Company Accounts

FAQs

Can I File Dormant Company Accounts?

Yes, as long as you meet the criteria set out by Companies House and HMRC (scroll up to the top for more details on this)

Can I Make a Trading Limited Company Dormant?

A Limited Company can go from trading to dormant but it would still need to meet the above criteria for being dormant. That means it must have no significant transactions, so you’ll need to have tied up all your loose ends.

I’ve Lost My Dormant Company UTR!

If you have lost your Company UTR then you will need to call HMRC on 0300 2003410 to retrieve it.

You must be a Company Director to make this phone call and they will ask various security questions, including your Registered Office address.

You should note that due to the confidential nature of this code HMRC are unable to issue a lost UTR number over the phone.

Do You Have to File a Tax Return for a Dormant Company?

Not necessarily. 

If you meet all the criteria for dormant company status you be able to avoid completing a tax return completely. 

Guide: How to File Dormant Company Accounts

Anita Forrest
About Anita Forrest

Anita Forrest is a Chartered Accountant turned entrepreneur who helps the self-employed gain financial confidence when it comes to running the numbers side of their business and filing tax returns with guides, templates and resources on the Go Self-Employed website.