Some businesses have been dormant since their inception. Other companies, on the other hand, will operate actively for some time before ceasing operations. These companies may be qualified to become dormant, which reduces the company’s ongoing filing obligations.
This article discusses the steps that the company must take to update its status to dormant.
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But first, consider whether dormant company status is the best option for your business. To qualify for the application of inactive accounts, your company must be dormant for the entire accounting period, so dormant status will not be ideal if you plan to resume trading within a few months. Here is what you need to know before hiring a trusted dormant company accounts filing service
What You need to do for a trading company to go dormant
To put a trading company on the dormant list, do the following:
Pay all outstanding bills and terminate any business contracts. Leases of equipment and buildings, insurance, utilities, and previously used telephone and internet services are examples of such items.
Reconcile the amounts owed to you by your customers and ensure that you have received all anticipated payments. Contracts with customers to supply goods and services must be terminated.
Pay any outstanding VAT owed to the Tax office and cancel the company’s VAT registration.
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Pay any outstanding employee wages and close the company’s payroll scheme.
It is usually a great idea to close the company’s business bank account (s). A specific requirement for the company to remain dormant is that it must not receive any interest payments, so any interest-bearing account must be closed.
The company can only be considered dormant in the future if it has no business transactions, with only a few exceptions as to types of permitted transactions. While adhering to all of the above details will take time, it will provide a fresh start. If, for example, you decide to continue paying for insurance or utilities, the company will not be considered dormant in HMRC’s eyes, and you will be required to file regular accounts.
How to notify the authorities that your company has ceased operations
To confirm with the company’s registrar, write to the local Corporation Tax Office and state the date the company became or will become dormant. The correspondence will include their contact information.
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The Corporation Tax Office will then send you a ‘Notice to serve a Company Tax Return’ to your registered office address. This covers the period immediately preceding the company’s inactivity. You must complete and submit the return, as well as pay any taxes owed by the company.
Within three weeks, the Companies House will confirm your company’s dormant status in writing. They will cease treating your business as active as of the date it becomes dormant, which means you won’t receive as much correspondence from them as you have in the past. In most cases, you will also not need to reach the Companies House until the company resumes trading or after deciding to dissolve it.
How to inform the Companies House
You are not required to notify Companies House about your business being dormant until the time comes to file your annual accounts. Full accounts must be filed for the period before the start of dormancy. However, for the first whole accounting period that the company is dormant, you must instead submit simple dormant accounts to the Companies House within nine months of the accounting reference date. This can significantly reduce administrative obligations, and it’s typically why most people put their businesses on hold.
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Dormant businesses must continue meeting several Companies House filing responsibilities on an ongoing basis, including:
Filing the confirmation statement, which is distinct from the company’s accounts.
An appropriate application must be completed when a new company secretary or director is appointed or terminated (or when specific details such as their name or service address change).
Changes to the office address must be filed using the appropriate form.
What a Dormant Company can and can’t do
Even if it is not trading, a dormant firm can remain on the Companies House register.
Certain transactions, such as the receipt of monies for debts, costs charged for changes to company details, or the cost of filing an annual return, can be permitted even if the firm is dormant. A dormant firm cannot actively participate in trading activities to generate profit unless the relevant authority is notified that it is back to active status.
How to Revive a Dormant Company
There is no need to notify Companies House you have resumed trading; simply file-trading accounts when due and refresh your company’s operations in your next Annual Return.
You must file-trading accounts rather than dormant accounts, and you may have to re-register for stuff like VAT if necessary.
If your company has been inactive for a while and you do not expect to trade within the next year or so, you should consider filing for dormancy. You can do this by notifying the relevant authorities. This will save you the hassle of having to file company accounts.