Annual accounts for a dormant company

If a company has been incorporated at Companies House, but is not currently carrying out any kind of business activity, or receiving income, then it is a dormant company.

But while HMRC will consider this company dormant for tax purposes, it still needs to file its annual accounts with Companies House.

Do I Need to File Accounts for a Dormant Company?

The answer is yes, and the definition of dormant for Companies House is quite rigorous.

It defines a dormant company as:

Having no significant accounting transactions during its accounting period.

In this context, a significant accounting transaction is one that the company should enter in its accounting records.

Significant transactions do not include filing fees paid to Companies House, penalties for late filing of accounts, or money paid for shares when the company was incorporated.

Therefore, if no such transactions occur, the company can have, and retain, its dormant status. But the evidence is in the annual accounts, which is a reason why dormant companies must continue to file them.

What Are Accounts for a Dormant Company?

A limited company will not need to submit a corporation tax return to HMRC once it has told HMRC it is dormant, unless it receives a further notice to deliver a tax return.

But it will still need to file annual accounts and a confirmation statement with companies house.

What it can do is file dormant accounts instead.

You file dormant accounts using form AA02.

The details you complete should include:

  • Your company name and number
  • The date of balance sheet
  • Confirmation of net assets
  • Approval by directors and date of approval.

It should also have your director’s signature.

Can You Contract with a Dormant Company?

Some dormant companies have never traded, but a dormant company is not the same as a non-trading company.

A non-trading company is one that does not carry out business, but may still have day to day financial transactions, such as rent, bank charges or legal fees.

A dormant company, on the other hand, should have no significant accounting transactions, which includes contracting work.

If the company is dormant, you cannot use it for contracting purposes.

How long can you keep a company dormant? You can do this indefinitely, providing you continue to meet both HMRC and Companies House criteria for being classed as dormant.

Are there advantages to a company being dormant? There can be various reasons for being dormant. It might be about protecting a trading name while preparing to launch; or restructuring a previously active business.

The owner might need extended time off for illness, or be taking a sabbatical.

Advice About Annual Accounts

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