Making Your Company Dormant for Corporation Tax

If your company has stopped trading or hasn't started yet, you may be able to make it dormant for Corporation Tax. This means you won't have to file Company Tax Returns or pay Corporation Tax until you start trading again. However, you'll still need to meet certain filing requ...

What dormant means for Corporation Tax

Your company is usually dormant for Corporation Tax if it:

Has stopped trading and has no other income (such as investments)
Is a new limited company that hasn't started trading yet
Is an unincorporated association or club owing less than £100 Corporation Tax
Is a flat management company

For Corporation Tax purposes, "trading" includes a wide range of activities: buying, selling, renting property, advertising, employing someone, or even receiving interest on bank accounts.

When HMRC decides your company is dormant

Sometimes HMRC will write to you first. You may receive a letter telling you that they've decided to treat your company as dormant, and that you don't have to pay Corporation Tax or file Company Tax Returns.

How to tell HMRC your company is dormant

If your company has stopped trading and has no other income, you can tell HMRC it's dormant for Corporation Tax using their online service.

You'll need:

Your company's name
Your 10-digit Unique Taxpayer Reference (UTR)
The date your company stopped trading (if it began trading)

If you cannot use the online service, you can tell HMRC by phone or post instead.

If you've already filed a Company Tax Return

If you've previously filed a Company Tax Return or received a 'notice to deliver a Company Tax Return', you'll still need to file one final Company Tax Return online. This return will show HMRC that your company is dormant for this period.

After you've told HMRC your company is dormant, you won't need to pay Corporation Tax or file another Company Tax Return unless you receive a further notice to deliver one, or you start trading again.

Other responsibilities while dormant

Companies House requirements

Being dormant for Corporation Tax doesn't mean you can ignore Companies House. You must still file:

A confirmation statement (previously called the annual return)
Annual accounts

If your company is also dormant according to Companies House rules and qualifies as 'small', you can file simplified 'dormant accounts' without an auditor's report.

Companies House defines dormant differently: your company is dormant for Companies House if it's had no 'significant' transactions in the financial year. Filing fees paid to Companies House, penalties for late filing, and money paid for shares when the company was incorporated don't count as significant transactions.

VAT registration

If you're registered for VAT and don't intend to trade again, you must deregister for VAT within 30 days of your company becoming dormant.

However, if you plan to restart trading later, you must continue sending 'nil' (empty) VAT returns while your company is dormant.

PAYE scheme

If you employ people but don't plan to restart trading in this tax year, you should close your PAYE scheme.

Restarting your dormant company

You must tell HMRC if your dormant company starts trading again. Sign in to your business tax account and follow the guidance to register for Corporation Tax again. This will set up your company for Corporation Tax.

Once you restart trading, you'll need to:

1. Send accounts to Companies House within 9 months of your company's year end

2. Pay any Corporation Tax due within 9 months and 1 day of your company's year end

3. Send a Company Tax Return (including full statutory accounts) to HMRC within 12 months of your company's year end

Accounting periods after restarting

Your Companies House accounting reference date stays the same while your company is dormant. Your Corporation Tax accounting period begins again when your company restarts business activities.

You can keep your company's accounting reference date the same and prepare statutory accounts as usual for the 12 months up until that date. Send these accounts to Companies House and use them to complete your Company Tax Return.

For example: if your accounting reference date is 30 September and you restart trading on 1 May, you would make accounts for the usual period from 1 October to 30 September. You'd send your accounts to Companies House, and your Company Tax Return for the period 1 May to 30 September to HMRC. After this, you'd complete accounts and a Company Tax Return from 1 October to 30 September each year.

You don't need to tell Companies House separately that you've restarted trading. The next set of non-dormant accounts you file will show them your company is active again.

Sources

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.