Dormant in the UK is a company that is registered with the Companies House, but at the moment does not carry out any commercial activity and does not receive income. The British Tax Department of Government (HMRC) considers this type of company to be inactive and not subject to taxation. In this case, the company may become inactive both from the moment of its registration and after a certain period of trading activity. In this article, we will figure out how to register a company as dormant and manage it in the UK?

Dormant companies: causes of the phenomenon

It would seem, why create a company in the UK, then declare it inactive, dormant? Sometimes the incorporation of a company is necessary to reserve a unique business name when starting a new business, and sometimes to restructure a previously active business. In some cases, a company has to be given the status of “dormant” because its owner is forced to interrupt its activities for some personal reasons (pregnancy and childbirth, a serious illness, a long trip, a vacation, “burnout”, etc.).

The company may remain dormant indefinitely, but it is worth notifying the Companies House of your decision as soon as possible and fulfilling some requirements in this regard. As the best business books will attest; many of the best companies to invest in are groups which may have many dormant subsidiaries – it’s just a natural status quo corporate structures reach after years of acquisitions and disposals of businesses.

The company needs to submit an appropriate resolution to Companies House and not conduct accounting transactions. It includes all operations that must be entered into the company’s financial statements without fail:

• reports that indicate information about the company’s possible debt and its assets;
• giving or receiving the money to or from anyone.

From this, we can conclude that a dormant company in the UK cannot make money transfers, as well as receive them, have debts or assets that make a profit. A dormant British company is required to submit annual reports on possible changes, documenting that corporate accounts are inactive. 

How to register a company as dormant

To register a dormant company in the UK or to transfer a previously operating company to inactive status, it is necessary to apply with the relevant application to the British tax office. In this case, it is worth indicating the exact date of termination of any activity.

Further, within 15 days, a notification will be sent to the legal address of the company, which confirms the status of the company as inactive. Such a company is no longer required to keep accounting records and submit an annual report.

Before applying for the transfer of the company to the status of inactive, it is necessary to ensure that all bills payable are paid, salaries of employees and directors are paid, and dividends are sent to shareholders.

Dormant company bank accounts

If the company immediately after registration becomes dormant, then it makes no sense to open a corporate account for it (at least while it is inactive). If the company has been operating for some time, then it is best to close all existing corporate bank accounts in order not to pay for their maintenance. Otherwise, the company will lose the status of inactive. Any unexpected payments are recommended to be paid from personal accounts.

What transactions can a dormant company carry out:

• payment of the filing fee for submitting an application with Companies House for sending an acknowledgement.
• payment of fines for late submission of reports to HMRC.

All other types of payments made by the dormant UK company will be considered accounting transactions requiring full financial reporting.

Does a dormant UK company have to pay tax?

No, there are no such requirements for dormant companies. However, businesses must ensure that there are no obligations to HMRC during the active period. If the dormant company trades, then it is required to fulfill obligations to pay taxes for this period.

This article should not be interpreted as financial advice. Please seek the services of an appropriately qualified chartered accountant to understand precisely how taxes will impact your business, or introduce yourself to the topic of saving tax via a saving tax book.

Dormant company reporting in the UK

The Companies Act 2006 states that inactive UK companies are required to submit annual reports confirming their dormant status. Such documents can be sent via the Internet using a special form AA02. You can report within 9 months after the end of the financial year. The confirmation report must contain the following information:

• the legal address of the company;
• information about directors;
• details of the secretary (if any);
• shareholder data;
• information on issued shares;
• the direction of the company;
• information about the location of the statutory documents.

You must provide it to confirm the information about the company, which is placed in the public register. If any data has changed in the company, then this should be reported to the  Companies House as soon as possible.

How to activate a dormant company

If the owner of an inactive company decides to “bring it back to life”, then he must notify HMRC of his intention within three months of starting any business or receiving any form of income.

If the company has never traded before, then it needs to register online as a corporate taxpayer and create an account.

However, it is worth remembering that you still need to pay for the maintenance of a dormant company. The expense item includes payment for the lease of a legal address, administrative and nominee services, etc.

If you already have a company in the UK but don’t use it yet, take care to make it inactive. It is also possible to register a new British company and immediately declare it dormant to protect intellectual property or assets, save it for future projects. If you are thinking about registering a British company, you can leave this task to the Hoxton Mix’s team.

Final words

A British company can become dormant for  the following reasons: 

• the owner is not ready to liquidate the company, as he plans to resume commercial activity after some time; 
• it is necessary to preserve the unique name of the company for future projects; 
• the owner of the company is forced to interrupt activities for personal reasons (illness, long business trips, maternity leave, etc.). 

A company can remain dormant for an unlimited amount of time.