{"id":6806,"date":"2019-10-07T09:13:01","date_gmt":"2019-10-07T08:13:01","guid":{"rendered":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/?p=6806"},"modified":"2024-01-30T10:25:18","modified_gmt":"2024-01-30T10:25:18","slug":"dormant-company-accounts-saving-your-time-and-money","status":"publish","type":"post","link":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/dormant-company-accounts-saving-your-time-and-money\/","title":{"rendered":"Dormant company accounts – saving you time and money"},"content":{"rendered":"
A dormant company is one that\u2019s not carrying out any business activity or receiving an income. This renders it inactive for Corporation Tax purposes as far as HMRC is concerned. It also means that abridged and unaudited accounts, known as ‘dormant company accounts’ can be sent to Companies House in certain cases.<\/p>\n
Despite this, many business owners continue to file full financial statements when there\u2019s no need. Here, we\u2019ll take you through the alternatives available for dormant company accounts, along with the requirements you need to meet in order for your company to be viewed as dormant by both HMRC and Companies House.<\/p>\n
We’ll also explain the legal obligations you need to fulfil with regards a company being classified as dormant.<\/p>\n
The Companies House definition of dormancy is that it must have had \u2018no significant accounting transactions during the accounting period\u2019. So, for example, it cannot have generated income, or earned bank interest.<\/p>\n
Even if someone traded for a short time, they\u2019re active in the eyes of Companies House and will need to file a full set of accounts for the financial year.<\/p>\n
However, small dormant companies can claim exemption from audit or filing full accounts under section 480 of the Companies Act 2006<\/a>.<\/p>\n HMRC is only interested in company activity if it\u2019s likely to lead to a Corporation Tax liability. It views a limited company as dormant up until the day it starts trading (no matter how long that takes), and there\u2019s no need to file tax returns. Once trading starts, HMRC needs to be informed within three months.<\/p>\n If a company subsequently stops trading, it\u2019s classified as \u2018non-trading\u2019 by HMRC but \u2018dormant for Corporation Tax\u2019. HMRC will allow a company to remain in this state for up to five years.<\/p>\n A company is dormant if:<\/p>\n Sometimes HMRC will consider a flat management company<\/a> as dormant.<\/p>\n To find out more, read HMRC’s official guidance on what is active and dormant for Corporation Tax purposes<\/a>.<\/p>\n A company that\u2019s both \u2018small\u2019 and \u2018dormant\u2019 has a significantly reduced statutory burden on it, only having to submit an unaudited, abridged balance sheet and certain notes to Companies House, plus file an annual confirmation statement (previously known as an ‘annual return’). It won\u2019t have to file a profit and loss account or directors\u2019 report.<\/p>\n To find out more, read GOV.UK’s guidance on dormant company accounts<\/a>.<\/p>\n To tell HMRC that your company has become dormant, you should contact the Corporation Tax department<\/a> by phone or post. You must do this within three months of becoming dormant. You\u2019ll need your 10-digit Unique Tax Reference to hand when you call.<\/p>\n Even if your company is dormant for Corporation Tax and dormant according to Companies House, you\u2019ll still need to file an annual confirmation statement<\/a> (formerly known as an ‘annual return’).<\/p>\n However, if your company is dormant according to Companies House and also <\/em>qualifies as small company<\/a>, you can file dormant company accounts without having to include an auditor\u2019s report.<\/p>\n A company is classified as \u2018small\u2019 if any two of the following apply:<\/p>\n If this is the case, you can:<\/p>\n You\u2019ll still need to send statutory accounts to your members and to HMRC as part of your Company Tax Return.<\/p>\n 1. Companies that have previously traded:<\/strong><\/p>\n If the company has been dormant for the full financial year, there is no need to file an annual Company Tax Return, profit and loss account, or directors\u2019 report.<\/p>\n However, you do need to file annual accounts which contain:<\/p>\n Bear in mind that you may still be obliged to prepare full accounts for the company\u2019s members, even if you do not have to prepare them for Companies House.<\/p>\n An annual confirmation statement must also be filed every year.<\/p>\n 2. Companies that have never traded:<\/strong><\/p>\n If your company hasn\u2019t traded since incorporation (or where the only transaction is the issue of subscriber shares), it\u2019s even simpler to file annual accounts. All that must be submitted is form AA02 \u2013 which requires the following information:<\/p>\n An annual confirmation statement must also be filed.<\/p>\n Quality Company Formations offers a dormant company accounts filing service for only \u00a349.99, with several purchase options as follows:<\/p>\n As soon as you have placed your order, we will send you an email with a short questionnaire, which you will need to complete and return to us. We will ensure your accounts are filed within 24 hours (1 working day) of receiving the completed questionnaire.<\/p>\n The \u2018accounting reference date\u2019 (ARD) lets you know the timeframe your company accounts need to cover. It represents the end of a company\u2019s financial year and will fall on the last day of the month in which the company was incorporated (making the due date different for each company).<\/p>\n So, if a company was incorporated on 18 May, the ARD will be 31 May the following year. You can set up an email reminder<\/a> via Companies House – they\u2019ve found that companies who do this are less likely to miss their due date.<\/p>\n You can make up accounts to the ARD or seven days either side of it. A company\u2019s ARD can be found using Companies House Service<\/a> or if you are a customer of Quality Company Formations you can login to your account<\/a> > My Companies > Click on your company name.<\/p>\n Tip: Be sure you don\u2019t confuse the ARD with your company\u2019s annual accounts due-date, which is the deadline for delivering your annual accounts to Companies House. Late filing can incur a penalty of up to \u00a31,500 (doubled if your accounts are late 2 years in a row).<\/em><\/p>\n As long as your accounts are not overdue, you can change your current or immediately previous accounting reference date, choosing to shorten or extend it. However, you can only lengthen the ARD up to a maximum of 18 months once every five years. You can shorten it as often as you like.<\/p>\nWhat makes a company \u2018dormant\u2019 for HMRC purposes?<\/h3>\n
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What are the accounting benefits of registering a company as dormant?<\/h3>\n
How can I let HMRC know my company has become dormant?<\/h3>\n
What does it mean to be dormant for Companies House, and when is a company exempt from audit?<\/h3>\n
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How are dormant company accounts filed?<\/h3>\n
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How do I work out my company\u2019s financial year (Accounting Reference Date)?<\/h3>\n
Can I change my Accounting Reference Date (ARD)?<\/h3>\n