What is a Dormant Company?

I am intending to temporarily stop trading through my limited company and return to employment for personal reasons. I have been told that I can leave my company dormant for this period and return to it at a later date. Could you please explain to me what a dormant company is?

1st February 2011

Companies House and    HMRC  both have differing definitions of what they class as a dormant company.

Companies House define a dormant company as a company which has no significant accounting transactions during it accounting period. A significant accounting transaction is one which it should enter in its accounting records. If a company has been dormant since the end of its last accounting period there is no need to submit full accounts. A dormant set of accounts can be submitted which do not have to contain a profit and loss account or a directors report. An annual return does still have to be filed yearly while the company is dormant.

HMRC consider a company to be dormant when they are not active, i.e. they are not trading. If no sales are made by a company HMRC will consider them dormant for tax purposes. A dormant company is not required to make a tax return. This exemption is gained by writing to HMRC informing of the date which the company stopped trading. In return HMRC will issue a final notice to file (if appropriate) and will not issue another notice until they are informed in writing that the company is once again trading.

By Jo Nockels

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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