Do I Have to File a Tax Return for a Dormant Company?
Operating a dormant company in the UK doesn’t exempt you from all legal responsibilities. Even without trading activities, certain filings are mandatory to maintain compliance and avoid penalties. This guide outlines the obligations for dormant companies concerning HMRC and Companies House, including how to register a company as dormant and file dormant company accounts.
What Is a Dormant Company?
In the UK, both HM Revenue & Customs (HMRC) and Companies House have specific definitions for a dormant company.
HMRC’s Definition:
A company is considered dormant for Corporation Tax purposes if it:
- Has stopped trading and has no other income, such as investments.
- Is a new limited company that hasn’t started trading.
- Is an unincorporated association or club owing less than £100 in Corporation Tax.
- Is a flat management company.
Trading includes activities like buying, selling, renting property, advertising, employing someone, or earning interest.
Companies House’s Definition:
Companies House considers a company dormant if it has had no ‘significant accounting transactions’ during a financial year. Significant transactions exclude:
- Filing fees paid to Companies House.
- Penalties for late filing of accounts.
- Money paid for shares when the company was incorporated.
It’s important to note that a company can be considered dormant by HMRC but not by Companies House, and vice versa, depending on the specific activities and transactions involved.
Do Dormant Companies Need to File a Company Tax Return?
If HMRC hasn’t been informed that your company is dormant, you must still file a Company Tax Return.
Once HMRC confirms the dormant status, you don’t need to file another return unless:
- HMRC sends you a notice to file.
- The company starts trading again.
It’s crucial to respond to any notices from HMRC promptly. Failure to do so can result in penalties, even if the company remains dormant.
How to Inform HMRC That Your Company Is Dormant
You must notify HMRC online when your company becomes dormant.
You’ll need:
- Company name.
- 10-digit Unique Taxpayer Reference (UTR).
- Date trading stopped.
If you cannot use the online service, you can inform HMRC by phone or post.
This ensures you’re removed from the obligation to file Corporation Tax returns until trading resumes.
Additionally, if your company is registered for VAT or operates a PAYE scheme, you must take appropriate actions:
- VAT: If you do not intend to trade again, you must deregister for VAT within 30 days of your company becoming dormant. If you plan to restart trading, you must send ‘nil’ (empty) VAT returns while your company is dormant.
- PAYE: If you do not plan to restart trading in this tax year, you should close your PAYE scheme.
Ongoing Filing Obligations with Companies House
Dormant companies must still:
- File annual accounts.
- Submit a confirmation statement.
If your company qualifies as small and dormant, you can file simpler dormant accounts without an auditor’s report.
Filing dormant accounts is free. Costs only arise if the dormant company fails to file on time and late filing penalties are incurred. It’s important that the responsibilities of being a company director are taken seriously. If you fail to comply, it can lead to a fine and, in the event of a serious breach, can lead to the company being struck off the register.
Dormant companies can file their confirmation statement online for a fee of £34.
A company does not need to tell Companies House if they restart trading. The next set of non-dormant accounts that they file will show that the company is no longer dormant.
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Consequences of Not Filing Required Documents
Missed filings can lead to:
- Fines and penalties: Late filing of annual accounts is a criminal offence. The company itself can face a civil penalty, and as a director, non-compliance can mean personal prosecution and a fine of up to £5,000.
- Strike off from the Companies House register: This could shut the company permanently.
The sliding scale of fines currently in force for late filing of annual accounts is:
- Up to one month late: £150
- 1-3 months: £375
- 3-6 months: £750
- More than 6 months: £1,500
Penalties for late filing can double if your accounts are late two years in a row.
Restarting a Dormant Company
When your company resumes trading, inform HMRC so it can be set up again for Corporation Tax.
You’ll need to:
- Send accounts to Companies House within 9 months of year-end.
- Pay Corporation Tax within 9 months and 1 day.
- File a Company Tax Return (with full statutory accounts) within 12 months.
If your company was previously registered for VAT, you must tell HMRC that you have ceased making VAT-taxable supplies and want to cancel this registration. You must do this within 30 calendar days of your company becoming dormant. This can be carried out online, or you can notify HMRC by post using form VAT 7.
If you employ anyone, you’ll have to register with HMRC as an employer and enrol for Pay As You Earn (PAYE).
Conclusion
Even if your company is dormant, you’re not off the hook. You still have legal responsibilities with both HMRC and Companies House. Staying compliant avoids unnecessary stress, penalties, or having your company struck off.
If you’re unsure, don’t guess—speak to an accountant or tax advisor to make sure you stay on the right side of the law.
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