You may have come across companies marked as “dormant” by Companies House. But what exactly does this mean? Dormant Companies are those registered with Companies House but remain inactive. This could be for various reasons, such as:
- Preparing to trade but not yet commencing business operations.
- Holding fixed assets like property without engaging in active business activities. For instance, a housing management company may handle income and expenses, while a dormant company solely owns the property or land.
- Safeguarding your sole trader trading name. As a sole trader, there’s a risk of someone else registering your trading name as a limited company. By registering it as dormant, you’re securing your business identity.
Companies House defines a dormant company as one with no significant transactions during the standard financial reporting year. Significant transactions typically involve entries into accounting records but exclude:
- Filing fees paid to Companies House
- Penalties for late filing of accounts
- Initial payments for shares during the company’s incorporation
What’s Involved in Registering a Dormant Company?
Registering a dormant company follows the same procedure as registering any other limited company. As long as there are no significant transactions recorded during the accounting year, the company will be classified as dormant.
Do I Need to Notify Companies House of Dormancy?
There’s no requirement to inform Companies House of dormancy upon initial incorporation. However, it’s advisable to notify HMRC for corporation tax purposes.
Starting from the second year, you’ll proceed with your Confirmation Statement as usual. Within this process, you’ll specify your Standard Industry Classification Code (SIC code), indicating your business activity. For dormant companies, the code 99999 is applicable.
Additionally, you’ll need to submit your first set of Annual Accounts. If your company hasn’t commenced trading, you’ll only need to provide Dormant Company Accounts, which are simpler than standard accounts. Timely submission is crucial to avoid penalties.
Is There a Time Restriction?
There is no specified duration for maintaining a dormant company, so you need not concern yourself with receiving warnings from Companies House on this matter.
You are not required to inform Companies House when your company transitions from dormant status. Instead, you would proceed with the Confirmation Statement and submit standard accounts, the complexity of which depends on the company’s size.
Keep in mind to also update HMRC regarding Corporation Tax obligations.