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How to Make a Limited Company Dormant

Looking to take a break from your company? As your accounting partner, we’re here to support you.

There are lots of reasons why a contractor might want to step away from their company for a time: perhaps you’re taking a break from your duties as a director for a while, or maybe you’re heading back to permanent employment for a fashion.

Whatever your reason, making your company dormant is an easy and simple way of halting your activities for a period of time. If you’re considering dormancy, we’ve put together some information to help the process.

What is a dormant company?

A dormant company is one which has ‘no significant accounting transactions’ throughout the financial year. The company will be registered with Companies House but will not be carrying out any business activities or receiving an income.

If you have already registered your company as dormant and carry out any trading activities, it will automatically lose its dormancy status.

How do I make my limited company dormant?

If you decide to pause trading, you must immediately register your company as dormant with HMRC. If your company has been active and traded prior, they will inform you and let you know that you need to complete a Corporation Tax Return for that period.

If you are VAT registered, you will need to cancel this registration along with any payroll operations and settle any outstanding debts which your company may have.

What are my responsibilities if my limited company is dormant?

Even if your company is dormant, there are still responsibilities which you must fulfil as a limited company director. You must file the following with Companies House:

  • Annual Confirmation Statement – even if a company is dormant, you must still file a statement to inform Companies House of your company’s officers and address details.
  • Annual Accounts – at the end of the financial year you will be required to submit accounts to prove there has been no trading.

What are the advantages of dormancy?

Making your limited company dormant can be a good option if you’re not ready to start trading at the time of incorporation but you want to secure your chosen brand and trademark to prevent anybody else from using that name.

Dormancy is a popular option for contractors who are looking for an easy and low-cost solution for a company which is not currently active. If you are restructuring the company, taking on new ventures or have been unable to trade for personal reasons, dormancy is also the easiest solution for halting all activities. However, if you intend to stop trading for more than three years, it is maybe more cost-effective to close your company permanently.

A dormant limited company has few responsibilities – the administration is minimal. In most cases, this option is easier than closing your company entirely and registering a new one with Companies House.

How do I start trading again?

It’s fairly easy to make your company active again and if you’re ready to start trading, can be easier than registering a new one. When it’s time to start trading through your company again, you must inform HMRC within the first three months of operation. Within nine months of your company’s year-end, Annual Accounts should be sent to Companies House, along with Corporation Tax.

If your company was never registered as active, you will need to apply for Corporation Tax. In order to do this, you will need to apply for a UTR (Unique Taxpayer Reference) number.

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No matter where you are in your contractor journey, we’re here to help make the process easy. Our expert accountants can take away your administrative burden and leave you more time to focus on what matters.

To find out what’s on offer and how we can enrich your self-employed experience, visit our services hub where you can get information on everything we offer to our clients.

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