Quick answers
- What does dormant company mean?
A dormant company is a limited company that is not doing business. - Is a dormant company the same as a non-trading company?
Not always. A company that has stopped trading but still receives interest or rent is not dormant for Corporation Tax, because GOV.UK counts getting interest and renting property as trading. - Do I need to tell Companies House my company is dormant?
You show Companies House the company is dormant through the accounts you file: dormant accounts for a financial year with no significant accounting transactions. - Does a dormant company pay Corporation Tax?
Once you have told HMRC the company is dormant, GOV.UK says it does not need to pay Corporation Tax or file another Company Tax Return unless it receives a further notice to deliver a return.
In more detail
The two tests are similar but not the same, so a company can be dormant for one and not the other. Being dormant does not switch off the company's duties.
It stays on the register and still files every year.
What does dormant mean for Companies House?
For Companies House, a dormant company is one that has had no significant accounting transactions during its financial year. A significant accounting transaction is any transaction the company must record in its accounting records. Only a short list of items is ignored, so most money moving in or out stops a company being dormant.
The rule comes from section 1169 of the Companies Act 2006. Anything outside that short list counts, however small. Bank charges, interest, a director paying a company bill or a sale of an asset are all accounting transactions that need review. Companies House looks at the whole financial year, so a company that traded for part of the year is not dormant for that year.
A company that is dormant for Companies House and qualifies as small can file dormant accounts instead of full accounts, and does not need to include an auditor's report.
GOV.UK lists the items that do not count as significant transactions:
- filing fees paid to Companies House
- penalties for late filing of accounts
- money paid for shares when the company was incorporated
Source: Dormant for Companies House
What does dormant mean for HMRC?
For HMRC, a company is usually dormant for Corporation Tax when it is not trading and has no other income, such as income from investments. HMRC's test looks at business activity and income rather than accounting entries. GOV.UK says that trading includes buying, selling, renting property, advertising, employing someone or getting interest.
HMRC's guidance adds that preliminary steps, such as writing a business plan or negotiating contracts, do not on their own mean a new company has started trading. Its examples of dormant companies also include an 'off-the-shelf' company held by a formation agent who plans to sell it on.
Sometimes HMRC writes first. You may get a letter saying HMRC has decided to treat the company as dormant and that it does not have to pay Corporation Tax or file Company Tax Returns. Otherwise, you can tell HMRC your company is dormant yourself once it has stopped trading and has no other income.
GOV.UK says your 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 has not started trading
- is an unincorporated association or club owing less than £100 Corporation Tax
- is a flat management company
Source: Dormant for Corporation Tax
Companies House and HMRC dormancy compared
The two tests overlap, but they ask different questions. Companies House asks whether anything had to be entered in the accounting records. HMRC asks whether the company is trading or receiving income. The table shows where the answers can differ.
| Question | Companies House | HMRC (Corporation Tax) |
|---|---|---|
| What is the test? | No significant accounting transactions in the financial year | Not trading and no other income |
| What is ignored? | Companies House filing fees, late accounts penalties and money paid for shares on incorporation | For a new company, pre-trading steps such as writing a business plan or negotiating contracts |
| Does bank interest count? | Yes. It is an accounting transaction that is not on the ignored list | Yes. GOV.UK lists getting interest as trading |
| How is dormancy shown? | By filing dormant accounts for the financial year | By telling HMRC online, by phone or by post, or by HMRC writing to you |
| What happens on restarting? | Nothing to tell. The next non-dormant accounts show the change | Tell HMRC within 3 months of the start of the new Corporation Tax accounting period |
Bank accounts, charges and interest while dormant
A dormant company can keep a bank account, but a bank charge or interest payment is an accounting transaction that Companies House does not ignore, and GOV.UK counts getting interest as trading. Before choosing dormant accounts, read dormant company bank charges to see how small payments affect the filing route.
Source: Dormant for Companies House
What a dormant company must still file
Dormancy reduces the paperwork but does not remove it. GOV.UK says a limited company must still file its confirmation statement and annual accounts with Companies House, even if it is dormant for Corporation Tax or dormant according to Companies House.
- A confirmation statement at least once every 12 months. Every company, including dormant and non-trading companies, must file one. The online Companies House fee is £50 with the first statement in each 12-month payment period.
- Annual accounts for every financial year. A company that is dormant for Companies House and qualifies as small can file dormant company accounts instead of full accounts.
- A Company Tax Return if HMRC has sent a notice to deliver one. HMRC's guidance also says a company that has not told HMRC it is dormant will still be required to submit a return. Read whether a dormant company files a CT600 for the details.
- VAT returns or a PAYE closure if the company is still registered for VAT or still has a PAYE scheme.
Source: Dormant for Corporation Tax
How long can a company stay dormant?
A limited company can stay dormant for as long as you want. That comes from GOV.UK's guidance on closing a company, which also says the company stays registered at Companies House, so the annual accounts and confirmation statement must still be filed every year it remains on the register.
The practical risk of a long dormancy is a missed filing rather than a time limit. GOV.UK warns that a company may be struck off the register if it does not file its confirmation statement, and late accounts attract penalties from Companies House.
Source: Closing a limited company
Dormant, struck off or dissolved?
These words describe different situations. A dormant company still exists on the Companies House register and keeps filing. A struck-off company has been removed from the register. GOV.UK says striking off is also known as dissolving the company. After it is struck off, you lose access to the company's bank accounts.
If you have no plans to use the company again, closing it may suit you better than keeping up the annual filings for years. A company can only apply to be struck off if, among other conditions, it has not traded or sold off any stock in the last 3 months and has not changed its name in the last 3 months. Our guide on how to close a limited company compares striking off with liquidation.
Source: Strike off your limited company from the Companies Register
Restarting a dormant company
When a dormant company starts doing business again, tell HMRC by registering for Corporation Tax again. HMRC's guidance says to do this within 3 months of the start of the company's tax accounting period, which begins when business activity restarts. You do not need to tell Companies House: the next non-dormant accounts show the change.
Frequently asked questions
What does dormant company mean?
A dormant company is a limited company that is not doing business. For Companies House it has no significant accounting transactions in the financial year. For HMRC it is not trading and has no other income, such as interest or investment income.
Is a dormant company the same as a non-trading company?
Not always. A company that has stopped trading but still receives interest or rent is not dormant for Corporation Tax, because GOV.UK counts getting interest and renting property as trading. It may also have accounting transactions that stop it being dormant for Companies House.
Do I need to tell Companies House my company is dormant?
You show Companies House the company is dormant through the accounts you file: dormant accounts for a financial year with no significant accounting transactions. Telling HMRC does not tell Companies House, and the confirmation statement is still due every year.
Does a dormant company pay Corporation Tax?
Once you have told HMRC the company is dormant, GOV.UK says it does not need to pay Corporation Tax or file another Company Tax Return unless it receives a further notice to deliver a return. A return HMRC has already asked for must still be filed.
Does a dormant company need an audit?
GOV.UK says a company that is dormant for Companies House and qualifies as small can file dormant accounts and does not have to include an auditor's report.
How long can a company stay dormant?
GOV.UK says you can keep a limited company dormant for as long as you want. It stays on the Companies House register, so it must keep filing annual accounts and a confirmation statement every year.
Official sources
10
- Dormant for Companies House
- Companies Act 2006, section 1169: dormant companies
- Dormant for Corporation Tax
- Corporation Tax: trading and non-trading
- Tell HMRC your company is dormant for Corporation Tax
- Closing a limited company
- Strike off your limited company from the Companies Register
- Filing your company's confirmation statement
- Companies House fees
- Restarting a non-trading or dormant company
Written and checked by SimpleFilings against these official pages. Last checked . SimpleFilings is operated by ONAF Limited (company number 12589383), an independent firm, not part of Companies House, HMRC or the government.