A UK company is dormant for Companies House if it had no significant transactions in the financial year. That does not mean it can ignore Companies House. A dormant company must still file annual accounts and a confirmation statement. HMRC has its own, separate test for Corporation Tax, so passing one test does not mean you pass the other.
This guide explains both tests, what to file, and what changes when a quiet company starts trading again.
Two tests, not one
GOV.UK's guidance on dormant companies says that "dormant" means different things for Corporation Tax and Company Tax Returns on one side, and for annual accounts and returns at Companies House on the other.
A company can pass one test and fail the other. That is why directors get caught. They hear "dormant", assume the company has no duties, and miss a filing.
| Companies House | HMRC (Corporation Tax) | |
|---|---|---|
| What it asks | Did the company have any significant transactions in the financial year? | Has the company stopped trading and does it have no other income? |
| What follows | You can file simpler dormant accounts | You may not need to pay Corporation Tax or file a Company Tax Return |
| Still required | Annual accounts and a confirmation statement | Possibly a return, if HMRC has asked for one (see below) |
When a company counts as dormant for Companies House
Companies House calls a company dormant if it had no "significant" transactions in the financial year you would normally report. The company must record a transaction in its accounting records for it to be significant. Money coming in, money going out, and assets and liabilities all count.
GOV.UK's guidance on micro-entities, small and dormant companies lists three things that are not treated as significant:
- filing fees paid to Companies House
- penalties for late filing of accounts
- money paid for shares when the company was incorporated
Everything else needs thought. If something in the company's books is not on that list, assume it counts and check before you file dormant accounts.
When a company counts as dormant for HMRC
For Corporation Tax, GOV.UK says a company is usually dormant if it:
- has stopped trading and has no other income, for example investments
- is a new limited company that has not started trading
- is an unincorporated association or club owing less than £100 Corporation Tax
- is a flat management company
A flat management company is a company set up so the residents jointly run a property, such as a block of flats.
HMRC reads "trading" widely. GOV.UK says trading includes buying, selling, renting property, advertising, employing someone or getting interest. A company with no customers can still fail the HMRC test if it earns a little interest or has someone on the payroll.
Do you need to tell HMRC?
It depends on what HMRC has already done.
- HMRC writes to you. You may get a letter saying HMRC treats the company as dormant and that you do not have to pay Corporation Tax or file Company Tax Returns.
- No letter, but the company has stopped trading with no other income. You can tell HMRC it is dormant for Corporation Tax.
- You have already filed a Company Tax Return, or HMRC has sent a "notice to deliver a Company Tax Return". You still file a Company Tax Return online. That return shows HMRC the company is dormant for the period.
Once HMRC knows, a limited company does not need to pay Corporation Tax or file another Company Tax Return, unless it receives a further notice to deliver one. If you are unsure which of these applies, check the company's HMRC correspondence before assuming there is nothing to file. Our page on Corporation Tax rates covers what applies once a company is trading.
VAT and PAYE
This is the part most guides skip, and it carries a deadline.
- Registered for VAT and not planning to trade again: you must deregister for VAT within 30 days of the company becoming dormant.
- Registered for VAT and planning to restart: you must send "nil" (empty) VAT returns while the company is dormant.
- You employ people: if you do not plan to restart trading in this tax year, you should close the PAYE scheme.
What a dormant company files at Companies House
A dormant company has two annual jobs.
- Annual accounts. Dormant accounts are a stripped-down set. They contain a balance sheet and certain notes to it. They leave out the profit and loss account and the directors' report. A balance sheet is a list of what the company owns and what it owes on one date.
- A confirmation statement. This is a separate yearly filing that confirms the company's registered details: directors, registered office and people with significant control (the individuals who ultimately own or control the company). It replaced the old annual return. Filing dormant accounts does not satisfy it. Our guide to the confirmation statement (CS01) walks through it.
The filing date for accounts depends on the company's accounting reference date, which is the date its financial year ends. Check the company's filing record at Companies House for the exact due date rather than working it out from memory. There is no extension to rely on, and late penalties are automatic.
How to file dormant accounts
There are two routes.
- Online. Companies House has an online service for dormant company accounts. You need the company's authentication code. Most directors find this the quicker and more reliable route, because the service prompts you for missing fields.
- On paper. Form AA02 is the paper form. It is designed for private companies limited by shares that have been dormant since incorporation. A director must sign it. A missing signature is a common reason for rejection.
Filing dormant accounts is free.
Form AA02 does not suit every company. A company limited by guarantee cannot use it and must file different accounts. A company that traded in an earlier period and has since gone quiet may also need accounts in a different format that carries forward last year's figures. If your company has ever traded, check the format before you file. A rejected filing wastes time you may not have.
Directors remain legally responsible for the accuracy of what is filed, even if the company has been dormant for years.
Audit exemption
Dormant companies that qualify as "small" do not need to be audited. GOV.UK says a company is small if it meets any two of these:
- turnover of £15 million or less
- £7.5 million or less on its balance sheet
- 50 employees or fewer
A genuinely dormant company will be far below all three. In practice, the audit exemption is not the obstacle. Getting the dormancy test right is.
A worked example
Sam set up a company two years ago to hold a business name. Sam paid £100 for the 100 shares when the company was formed. The company has not traded since.
- Companies House test. The only money in the books is the £100 paid for shares at incorporation, plus the Companies House filing fees. All of these are on the not-significant list. The company is dormant. Sam files dormant accounts and a confirmation statement.
- HMRC test. The company has not started trading and has no other income. It is dormant for Corporation Tax. If HMRC has already sent a notice to deliver a Company Tax Return, Sam files one online to show the company is dormant. Otherwise Sam tells HMRC.
Now change one fact. Suppose the company puts £5,000 in a savings account and earns £50 interest. HMRC treats interest as trading, so the company is not dormant for Corporation Tax. The £50 of interest is also not on Companies House's list of exceptions, so it should be treated as a significant transaction. The company is no longer dormant for either purpose, and a full set of accounts is needed.
If the company starts trading again
A company that restarts trading has no duty to tell Companies House about its change of status. It files regular, non-dormant accounts, and those accounts show it is no longer dormant.
What the company owes HMRC on restarting depends on its circumstances. GOV.UK has a separate page on restarting a non-trading or dormant company, and you should read it before you take your first order. If the company is VAT-registered, remember the nil return rule above.
Late filing and being struck off
Companies House charges late filing penalties automatically. They grow the later the accounts are, and the amount can double if the accounts are late two years running. Check GOV.UK for the current penalty amounts. A dormant company is not exempt.
Persistent failure to file can also lead to the company being struck off the register, and directors can face enforcement action. Missing the confirmation statement can have the same result. Note that a late filing penalty is itself one of the three payments that does not break dormancy, so paying one will not change the company's status. It is still best avoided.
Other duties that continue
Dormancy does not suspend the company's other obligations. The directors are still directors. The register of people with significant control still has to be right, and the confirmation statement is where it is reported to Companies House. Directors should also read our guide to Companies House identity checks for directors, because identity verification applies to a dormant company's directors as it does to any other.
Frequently Asked Questions
Does a dormant company need to file accounts?
Yes. It files annual accounts and a confirmation statement. The accounts can be dormant accounts if the company is dormant for Companies House.
Does a dormant company pay Corporation Tax?
Not once HMRC has been told it is dormant, unless HMRC sends a further notice to deliver a Company Tax Return. If you have already filed a return or received a notice, you still file one to show the company is dormant.
Can a company be dormant for HMRC but not for Companies House?
Yes, and the reverse is possible too. They are separate tests with different questions.
Does it cost anything to file dormant accounts?
No. Filing dormant accounts with Companies House is free.
What if I miss the deadline?
Penalties are automatic and can double if you are late two years in a row. File as soon as you can to limit the damage.