Making a Company Dormant
A dormant company is defined as one which has not had any transactions for its financial year, in other words, no form of business activity has taken place. This includes any deposits made through the bank or payment of bank fees, since any of these or other transactions would change the classification of the company to Active.
Dormant companies must be registered with Companies House nonetheless and must still file their annual set of accounts with Companies House within 9 months of the year-end date. These inactive accounts must contain a statement of financial position accompanied with any relevant notes to the accounts. The directors of such companies must also file their Confirmation Statement with Companies House annually regardless of the trading status and whether or not there have been changes from the previous years’ Confirmation Statement. Failure to do so can risk the company being struck off from Companies House.
The deadline for filing the Confirmation Statement is usually 14 days post the end of the review period with the review period itself being 12 months after the date of incorporation or the date the last Confirmation Statement was filed. For example, if the business started on 1st January 2018, its review period would end on 31st December 2018, making the deadline for filing the Confirmation Statement 14th January 2019.
To convert an active entity into a dormant one, the firm must engage with HMRC(usually via written means of communication), as they will then provide the company with a notice for a company tax return. This would be to pay off any tax liabilities on profits earned prior to the inactivation of the company. Should the company be VAT registered, it must also disclose to HMRC its desire to halt trading and deregister its existing VAT status. This would involve filling a VAT7 form or communicating the same to HMRC via post. Alike any impending corporation tax liable, a final VAT return may also be necessary and payment of the same will have to be made.
Lastly, should the directors of a previously dormant company seek to recommence trading, they must inform HMRC at least 3 months before the date they wish to commence trading again.
Thinking of setting up a dormant company, or want to inactivate an existing company? Why not get in touch with us to understand the requirements around bank accounts and getting the necessary formalities in place to give you a stress-free and relaxing experience. How to pay the accountants fees for filing accounts and confirmation statements if the bank account mustn’t have any transactions and whether the directors still need to file a personal tax return? Find out answers to all these and other queries at Cheylesmore Accountants. We are always available and can provide a host of other financial and tax-related services to enhance your business.
