You registered your limited company with high hopes perhaps a new business startup or a holding structure. But then life happened. The business was not a successful one or you put things on hold. Now there is no business for your company and you question yourself if you really need to do anything with it? Do dormant companies have to file accounts?
The answer is yes. Even if your company has not used a single penny to trade, it still has some legal regulations to both Companies House and HMRC. Not able to meet these regulations can lead to fines and penalties and in some cases the company might be struck off the register. This guide will discuss everything you need to know about dormant company accounts and how to follow regulations without unnecessary stress.
What Does ‘Dormant’ Actually Mean?
It is important to get to know what dormant means in the eyes of the law before you start filing obligations. This definition varies slightly depending on whether you are dealing with Companies House or HMRC.
Companies House definition: A company is regarded as dormant by Companies House if it has had no major accounting transactions during the accounting period. A significant accounting transaction is one that must be submitted in the company’s accounting records. Minor administrative transactions are generally excluded.
HMRC definition: For Corporation Tax purposes, HMRC considers a company dormant if it is not active, which means it is not carrying on business activities or receiving income. However, you must still notify HMRC if your company becomes dormant after previously being active.
Do Dormant Companies Need to File Accounts with Companies House?
Yes. Every company registered in the UK, including dormant ones, must file annual accounts with Companies House. However, dormant companies benefit from simplified requirements. Rather than preparing full statutory accounts, a dormant company can file a much shorter document known as dormant company accounts (sometimes called abbreviated accounts).
These dormant accounts typically include only a balance sheet and a few basic notes, there is no requirement to include a profit and loss account or a directors’ report. This makes the process far simpler and quicker than filing accounts for a trading company.
You must also continue to file your confirmation statement (previously known as the annual return) every year. This confirms that the information Companies House holds about your company is accurate. Unlike accounts, the confirmation statement costs a small fee (currently £34 when filed online) and must be submitted within 14 days of the anniversary of either incorporation or the last statement made.
What About HMRC and Corporation Tax?
This is where things get slightly more nuanced. If your company has never traded or received any income, you may be able to tell HMRC it does not need to file a Company Tax Return. You can do this by writing to or calling HMRC, informing them the company is dormant for Corporation Tax purposes.
However, if HMRC has sent you a ‘Notice to Deliver a Company Tax Return’, you must file one regardless of whether the company is dormant. Ignoring this notice can lead to automatic late filing penalties, even if no tax is owed.
If your company was previously active and has since become dormant, you must also ensure that any outstanding Corporation Tax returns are filed and that all taxes owed have been paid before you notify HMRC of the change in status.
How Long Can a Company Stay Dormant?
There is no legal time limit on how long a company can remain dormant. A company can technically stay dormant indefinitely, provided it continues to meet its annual filing obligations. Many company directors keep dormant companies on the register for years, particularly when they wish to protect a company name or hold it in reserve for future use.
That said, if you have no intention of ever using the company, it is worth considering whether to formally dissolve it (also known as striking off). This removes the ongoing obligation to file accounts and pay the confirmation statement fee. You can apply to Companies House to have the company struck off voluntarily using form DS01, provided the company has not traded in the preceding three months and meets other basic criteria.
What Happens If You Miss the Filing Deadline?
Missing your filing deadlines, even as a dormant company, carries real consequences. Companies House imposes automatic late filing penalties on accounts submitted after the deadline. For private limited companies, the penalty starts at £150 for accounts filed up to one month late, rising to £1,500 if they are more than six months overdue. If the company was also late the previous year, these penalties double.
More seriously, if accounts and confirmation statements are persistently not filed, Companies House can initiate the process of striking the company off the register. If this happens whilst the company still holds assets, such as a bank account or property, those assets may become bona vacantia (ownerless property belonging to the Crown). Restoring a company after it has been struck off is both time-consuming and costly.
Key Deadlines to Keep in Mind
For a newly incorporated company, you must file your first accounts within 21 months of the date of incorporation. After that, accounts must be filed within 9 months of your company’s financial year end. The confirmation statement must be filed within 14 days of its due date each year.
Record these dates and set reminders well in advance. Given that dormant company accounts are relatively straightforward to prepare, there is little reason to let the deadline creep up on you.
Should You Use an Accountant for a Dormant Company?
For many dormant companies, the filing requirements are simple enough to handle yourself. Companies House offers a WebFiling service that allows you to submit dormant company accounts online for free. HMRC similarly allows you to manage much of this through your online Government Gateway account.
However, engaging an accountant like Lexarox Accounts, even for a dormant company, can be worthwhile if your circumstances are more complex. For example, if the company previously traded, if there are outstanding tax matters to resolve, or if you are unsure about the correct status to report to HMRC, professional advice can save you from making costly mistakes.
Many accountancy firms offer low-cost dormant company packages that cover both the Companies House accounts and the confirmation statement, giving you peace of mind for a modest annual fee.
Conclusion
Owning a dormant company does not mean you can simply forget about it. Your obligations to Companies House and HMRC continue for as long as the company exists on the register. The good news is that these obligations are far less burdensome than those of a trading company: dormant accounts are simple, quick to prepare, and free to file online.
The most important thing is not to ignore your deadlines. A little organisation each year will keep your company in good standing, preserve your company name, and protect any assets held within the structure. Whether you choose to handle the filings yourself or engage a professional, staying on top of your dormant company obligations is far easier and far cheaper than dealing with the consequences of non-compliance.
Frequently Asked Questions
Q1: Does a dormant company need to file accounts every year?
Yes. Dormant companies must file simplified accounts with Companies House and a confirmation statement every year, regardless of trading activity.
Q2: Can I file dormant company accounts myself, without an accountant?
Yes. Companies House offers free online filing for dormant accounts. Most company directors can manage this without professional assistance.
Q3: Do I need to tell HMRC my company is dormant?
Yes. You should notify HMRC in writing or by phone. If they send a Corporation Tax notice, you must still respond promptly.
Q4: What is the penalty for late filing of dormant company accounts?
Penalties start at £150 for up to one month late and reach £1,500 beyond six months. Repeated lateness doubles all charges.
Q5: Can a company be dormant indefinitely?
Yes, there is no legal time limit. A company can remain dormant as long as it continues filing its annual obligations on time.
Q6: What is the difference between a dormant company and a dissolved company?
A dormant company still exists legally; a dissolved company has been removed from the Companies House register entirely and no longer exists.
