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Is my company dormant for Corporation Tax, for Companies House, or both?

They are two separate tests.

HMRC looks at whether your company trades or has any income. Companies House looks at whether it had any significant transactions. Either way, you still file accounts and a confirmation statement.

Published

At a glance

For Corporation Tax
Usually if it has stopped and has no other income, or is new and has not started trading
For Companies House
Dormant if it had no in the
Tell HMRC
Online, or by phone or post

Sources

This entry is general information for directors of UK private limited companies, not advice about a particular company.

Does this apply to me?

  • Your company is new, has not started trading and has no income. Usually for Corporation Tax. If its only transaction is the money paid for its shares by the people who set it up, it is dormant for Companies House too.

  • Your company has stopped trading, but earns bank interest. Not dormant for Corporation Tax. Earning interest makes a company active for Corporation Tax. For Companies House, see dormant company accounts.

  • Your company is trading. Not dormant for Corporation Tax.

  • Your company only exists to hold what HMRC calls "chargeable assets", and they are unlikely to produce any profit, income or gains soon. HMRC may treat it as dormant for Corporation Tax.

Sources

What to do

  1. Check the Corporation Tax test. Is your company , or does it have any other income?

  2. Check the Companies House test. Did it have any in the ?

  3. If it is dormant for Corporation Tax, tell HMRC. Use HMRC's online service, or phone or write. You need your company's name, its 10-digit (UTR), and the date it stopped trading, if it ever traded.

  4. If HMRC has already asked for a return for the period, file it online. The return shows HMRC your company was .

  5. Keep filing with Companies House. You still file accounts and a every year.

  6. If your company is registered for VAT and will not trade again, deregister. Do this within 30 days of it becoming dormant.

Sources

How it works

Two bodies, two tests

A company may be if it is not and has no other income, such as from investments. But dormant means different things for Corporation Tax and for Companies House. HMRC's test is about activity and income. Companies House's test is about transactions.

So your company can be dormant for one and not the other. Check each test on its own.

Sources

  • What is tested

    Corporation Tax (HMRC)
    Trading and any other income
    Companies House
    Significant transactions in the financial year

  • Bank interest

    Corporation Tax (HMRC)
    Makes it active, so not dormant
    Companies House
    See dormant company accounts

  • Some Companies House fees, late filing penalties, share money paid by the people who set it up

    Corporation Tax (HMRC)
    Not the test
    Companies House
    Do not count

  • Still file accounts and a confirmation statement?

    Corporation Tax (HMRC)
    Yes, file both
    Companies House
    Yes, file both

Sources

Dormant for Corporation Tax

Your company is usually dormant for Corporation Tax if either:

  • it has stopped trading and has no other income, such as from investments

  • it is a new company that has not started trading

For this test, GOV.UK counts buying, selling, renting property, advertising, employing someone and getting interest as trading.

Why does interest count? Because HMRC's test looks at income as well as trade. A company is generally active if it earns interest, manages investments or receives any other income. HMRC treats a dormant company as one that is not active.

For example

Say Bramley Studio Ltd stops trading, and £20,000 stays in its savings account, earning interest.

It is not dormant for Corporation Tax, because it is getting interest.

If instead

The money earns no interest and the company has no other income. It is then usually dormant.

A new company can get ready to trade, and spend money doing so, without HMRC treating it as trading.

Sources

The detail The exact rule

HMRC's trading and non-trading guidance: for Corporation Tax purposes, HMRC views a dormant company as one that is not active, not or not within the charge to Corporation Tax. A company is generally active when it is, for example, carrying on a trade or professional activity, buying and selling goods with a view to making a profit, providing services, earning interest, managing investments or receiving any other income. A newly formed company may carry out pre-trading activities or incur pre-trading expenditure before it officially opens without HMRC deeming that it has started trading.

HMRC's COTAX manual (COM1040) gives the same two tests as GOV.UK. As a relaxation, a company that merely exists to hold chargeable assets can be treated as dormant, as long as the assets are unlikely to produce any profits, income or gains in the near future. GOV.UK also lists unincorporated associations or clubs owing less than £100 Corporation Tax, and flat management companies.

Sources

Dormant for Companies House

Companies House calls your company dormant if it had no in the . When you decide this, you can ignore:

  • money paid for shares by the people who the company

  • the Companies House fee for changing your company's name, it, or filing a

  • a penalty for filing your accounts late

Nothing else is on the list.

For example

Say Priya sets up a new company and pays for its shares. Its only other payment is the Companies House fee for its confirmation statement.

It had no significant transactions, so it is dormant for Companies House.

You must file a confirmation statement and accounts either way. If your company is dormant for Companies House and also counts as small, it can file simpler . It also does not need an .

If your company starts trading again, you do not need to tell Companies House. Your next accounts will show it is no longer dormant.

What counts as a significant transaction under company law, and what dormant accounts contain, are in dormant company accounts.

Sources

The detail The exact list

Companies Act 2006, section 1169(3): in deciding whether a company is dormant, these are disregarded: any transaction arising from the taking of shares by a subscriber to the memorandum in connection with the formation of the company; and the payment of a fee to on a change of the company's name, on re-registration of the company, or for registration of a confirmation statement, or of a penalty under section 453 for failure to file accounts. Companies House's accounts guide gives the same list. GOV.UK's dormant companies guide is wider: it says significant transactions do not include filing fees paid to Companies House. Where they differ, the law governs: it names only those three fees.

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Telling HMRC, and what happens next

You can tell HMRC your company is dormant using its online service. If you cannot use it, you can phone or write. HMRC may also write to you. It may say it has decided to treat your company as dormant, with no tax to pay and no returns to file.

Once you have told HMRC, your company has no Corporation Tax to pay and no more returns to file while it stays dormant. That changes if HMRC asks for a return, or your company starts trading again.

Why can HMRC still ask? Because the law lets HMRC require a return from a company by sending a notice. If you get one, you must file.

Has your company filed a return before, or had a ? Then you still file a return online for the dormant period. It shows HMRC your company was dormant.

Sources

Consequences

If you get it wrong

HMRC says a that has not told HMRC must still file a return, or it may face penalties.

The legal duty comes from HMRC's . If HMRC sends one and you miss the , your company pays a late filing penalty. You must file even if your company made a loss or has no tax to pay.

For what happens if you file when your company was not dormant, see dormant company accounts.

Sources

Less common situations

Your company goes dormant, then starts again. Its ends when it stops . A new one begins when it starts doing business again. You must tell HMRC within 3 months of that new start. See when to tell HMRC your company is active.

HMRC's notice covers a dormant stretch before your company started trading. Say your first accounting period begins during the notice's period, and none ends in it. Then you file a return for the part before it.

Your company was dormant for all of the period in HMRC's notice. The law still requires a return for the whole period. But HMRC tells its staff not to insist on one if satisfied your company was dormant throughout.

Sources

The detail The exact rule

HMRC's manual (CTM93020): if no accounting period ends within the period in the notice, but one begins during it, the notice requires a return for the part before the accounting period begins. HMRC says this is most likely with new companies that start trading some months after . If the company is outside the charge to Corporation Tax for the whole of the notice period, the notice requires a return for the whole of it. HMRC says: "This is the legal position. In practice you will not insist upon the submission of a return when you are satisfied that the company was dormant throughout the period." Corporation Tax Act 2009, section 10: an accounting period ends on, among other things, the company starting or ceasing to trade, or ceasing to be .

Sources

Not covered here

The company-law meaning of a , what contain, the confirmation statement, and penalty amounts. See dormant company accounts and the confirmation statement.

Where this comes from

44 official sources. Open a group to see them.

The law 14 sources
HMRC 7 sources
GOV.UK 16 sources
Companies House 7 sources

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