If a company has stopped trading and has no other income, then the company is usually classed as dormant for Corporation Tax purposes.
A company is usually dormant for Corporation Tax if it:
- has stopped trading and has no other income, for example investments
- is a new limited company that hasn’t started trading
- is an unincorporated association or club owing less than £100 Corporation Tax
- is a flat management company.
There is a special online form that can be used to advise HMRC if a company is dormant. The form can be found at www.gov.uk/tell-hmrc-your-company-is-dormant-for-corporation-tax. In order to complete the form, you will need the company’s name, 10-digit Unique Taxpayer Reference (UTR) and the date the company ceased trading.
HMRC can also send a notification if they think a company is dormant. This notice will state that a company or association is dormant and is not required to pay Corporation Tax or file Company Tax Returns.
Limited companies are still required to file annual accounts and a confirmation statement even if the company is dormant for Corporation Tax and dormant according to Companies House. A company defined as ‘small’ by Companies House can instead file ‘dormant accounts’ and does not have to include an auditor’s report.
A company can stay dormant indefinitely, however there are costs associated with this option. This might usually be done if for example a company is restructuring its operations or wants to retain use of a company name, brand or trademark.