HMRC & Dormant Company Status Definition

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

HMRC have their own definition of Dormant Company Status, differing slightly to the definition set out by Companies House.

The HMRC Definitions of Dormant Company Status

Both HMRC and Companies House defines Dormant Company Status as a Company or Organisation that is not active, trading or carrying on business activity.

HMRC goes a little further with its definition of Dormant Company status, requiring a Company to meet the following conditions:

  • 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 destined to be removed from the Companies Register.

If you have formed a Limited Company but not engaged in any business activities or trading and undertaken some initial pre-trading activities, then your Company may still be considered Dormant.

Dormant Company Accounts and Corporation Tax

A dormant company is obligated to file certain returns even if it has traded or not, these are:

  • Dormant Company Accounts (AA02 Form) annually;
  • Confirmation Statement annually;
  • HMRC Tax Return annually or notification that a Company is dormant (one off).

How to Avoid Having to File a Tax Return for a Dormant Company

HMRC default position is that all Registered Companies need to file a Corporation Tax Return. To avoid filing a Tax Return for a Dormant Company you need to contact HMRC by letter.  My step by step guide contains a template you can use to write to HMRC and tells you the information you need to include with your letter as evidence of Dormant Company Status.

The HMRC Definition of Dormant Company Pre Trading Activities

There are certain Pre Trading Activities or expenditure you can engage in which still allow your Company to qualify as Dormant for HMRC Corporation Tax purposes, allowing you to avoid filing a Tax Return.  These include:

  • preliminary activities such as writing a business plan or negotiating contracts;
  • preliminary expenditure such as incurring costs with a view to deciding whether to start a business.

What is a Dormant Company