If your company is no longer trading for some reason. Still, if you do not want to close it forever, you can register as a dormant company in the UK. Read more for more information.
Dormant Company
A dormant company is any company or association that is not conducting business or trading and has no other sources of income. As a result, a company is considered dormant, also known as ‘inactive,’ if it is not trading or receiving any form of trading income.
It should be noted that a company can only be considered dormant if it has been formally registered with companies house and its cease of trading has been notified to HMRC.
When Is a Company Permitted to Register as a Dormant?
A company can be declared dormant in the following situations:
- It is not trading and generating income
- It is a growing entrant that has not yet officially started trading
- It is a property management firm
- It is a charitable organisation that owes no more than £100 in corporation tax.
Why Register a Company as a Dormant?
There are several reasons why you might want to register your company as dormant:
Setting up in advance:
If you’re starting up a new business and would like to make plans before you begin trading, you can register as dormant. However, this is no longer a common reason, as forming a company now takes far less time than it did prior to the ability to register a company on the company’s house website.
However, setting up your business ahead of time can still be a feasible alternative, for example, to secure your company name. Vakilsearch can now assist you with such operational processes.
Protect your interests:
You may work as a freelancer or sole trader. Still, there is no way of protecting yourself from others forming a company under your trading name. To safeguard your interests and avert this, you can sign up like a dormant company, which means your title is safe. You can continue to trade without any administrative duties that run a limited company.
Temporarily not trading:
You can register as a dormant company if you need to take a break from trading but plan on returning that at a certain time in the future. You won’t have to worry about submitting your accounts by registering as dormant. Instead, you can start concentrating on the purpose of your business’s closure.
Suppose you decide to close your company with the specific intent of reopening it eventually. In that case, there is no assurance that the name will not be taken when you come back to the business.
Hold a fixed asset:
It is usual for dormant companies to be established in order to retain an asset, such as a property, and is frequently used by property management companies.
When a company is in the process of closing:
Before a company permanently closes, it is common to be registered dormant.
Do You Have to Register a Non-trading Company as a Dormant?
No, but if the company isn’t making money, it’s best to register it as dormant to avoid administrative costs and duties.
Difference Between a Non-trading and Dormant Company
Non-trading companies can transact, whereas dormant companies cannot. HMRC also requires non-trading companies to file a tax return, which a dormant company is exempt from
The Process of Registering as a Dormant Company
The process of registering as a dormant company is fairly simple. It is done in the same way that the company is registered with Companies House.
What do you need beforehand?
You’ll need the following before going to the companies house website to register your company as dormant:
- The name of your company
- Your business address (which can be a home or virtual office address)
- Your Director’s or Directors’ names
- Your shareholder’s name(s)
- At least one SIC code for your business.
Where do you need to enter this information?
All of this information is available on the company’s house website. As long as you have all of the above information, the form is simple to use and understand.
Check out our post on how to start a business in the UK for a more in-depth look at the registration process.
Once completed, the company’s house website will be updated to publicly display information about your dormant company. You will also need to notify HMRC that your company is inactive. Get in touch with Vakilsearch for assistance with company formation.
Inform HMRC That Company Is Now Dormant
Although there is no legal obligation to notify companies’ houses of your company’s inactive statement until your next annual accounts are due. You should notify HMRC by contacting the local Corporation Tax office as soon as possible. They will respond in about 15 days to confirm the company’s dormant status. After HMRC contacts you to confirm your company’s dormant status, it is unnecessary to contact them again until the company becomes active.
Suppose your pvt ltd company was active before deciding to go dormant. In that case, you must complete HMRC’s Company Tax Return and pay the relevant Corporation Tax for the active period. Following that, the company will be considered inactive until it resumes trading. HMRC’s official website contains relevant submissions, filings, and contact information.
What Happens When You Want to Start Trading Again?
You must notify both company’s house and HMRC when you want to start trading with a company declared dormant. If you want to start trading with a dormant company, you must notify companies house and HMRC.
