What is deemed a dormant company?
For Corporation Tax, HMRC will consider your company as dormant if it falls under one of the following categories:
• It has stopped trading. This also includes it receiving no other income such as investments.
• It's a new limited company that has yet to start trading.
• It's a flat management company.
• It is a club or unincorporated association that owes Corporation Tax at less than £100 in total.
If HMRC believes your business is dormant, there may be no need to inform them about your plan. This is because HMRC could get in touch first with a letter. The letter details they've chosen to treat your business or association as dormant and that you no longer have to file Company Tax Returns or pay Corporation Tax as a result. If that letter doesn't arrive, however, you need to take the initiative and contact HMRC.
Letting HMRC know about your dormant company
The good news: it's generally straightforward to declare your company as dormant to HMRC. You can tell HMRC about the situation if your business has stopped trading or meets one of the other criteria listed above. There are two ways as to how this works. First, if you have received a "notice to file a Company Tax Return" from HMRC, or you've filed a return previously, your next step is to go online and login into your GOV.UK account. You will then have to file a Company Tax Return. In this return, you can demonstrate to HMRC your company is now in a dormant state.
If a "notice to file a Company Tax Return" has yet to arrive from HMRC, you will need to go a different route. That route is via phone. Simply call HMRC and let them know your company is currently dormant. Remember: If you use a PAYE scheme and are registered for VAT, it's vital to de-register from both. That's unless your plan is to restart trading in the future.
Restarting a dormant company
Has your company yet to trade, but do you want to move out of its current dormant designation? In this scenario, there's one thing you need to do before anything else: register with HMRC. Once you're registered or have traded before, your next move is to tell HMRC about your company restarting. This is signalled when you register for Corporation Tax.
Next up, you need to get your accounts in order and send these to Companies House. The accounts have to be sent within nine months of your business year-end. If you have any Corporation Tax due within your business year-end, this needs to be paid.
Finally, you have to send HMRC a Company Tax Return - which features full statutory accounts - within 12 months of your business year-end.