What Is a Dormant Company?

Companies not engaging in business activity or generating revenue through trading are tagged as “dormant” or inactive. However, they must still be registered under Companies House for tracking purposes. Dormancy can take effect from the date of incorporation or after a trading period.

Additionally, businesses that have permanently ceased trading and reported accordingly to HM Revenue & Customs (HMRC) are considered dormant because of corporation tax.

Key Takeaways

• A dormant company is a limited company that is legally registered but not trading and has no income-generating activity (such as sales, services or investment income).
• Declaring your company dormant can help preserve the business name, simplify admin and reduce active trading costs while keeping the legal structure intact for future use.
• Even while dormant, your company must still submit yearly filings to Companies House (such as a confirmation statement and dormant accounts) and meet any minimal tax or HMRC obligations.
• To remain dormant, you must avoid “significant accounting transactions” (for instance no salaries, dividends, bank account activity or trading), yet the company may retain its status indefinitely.
• If your company starts trading or receives income again, you must notify HM Revenue & Customs and switch to standard accounting, tax and reporting obligations without delay.

What is Considered “Trading”?

During dormancy, an organisation cannot trade or receive any income. Failure to comply forfeits their inactive status and will be required to prepare statutory accounts.

Some examples of trading activities include:

• Buying or leasing of property
• Buying and selling of goods and services
• Employing or hiring staff members
• Managing investments
• Accepting dividend payments
• Issuing shareholder dividends
• Obtaining interest on paying
• Using the company’s bank account to cover accounting costs and legal fees

Common Reasons for Dormancy

UK businesses file for dormancy status for various reasons, such as:

• It is a new company that hasn’t begun trading
• It is an ‘off-the-shelf’ or ‘shell’ company held by a company formation agent intending to sell it on
• It was formed to own an asset such as land or intellectual property so it will never trade.
• Restructuring of a previously active organisation
• Reserving a business name before the company’s launch
• Protecting a business name from being registered by another company
• When the business owner wishes to take time off due to travel, illness, maternity leave, a sabbatical, etc
• It is a company that’s no longer trading and destined to be removed from the Companies Register

While a company can remain dormant for an extended period, certain obligations must still be fulfilled with the Companies House. This includes updating your company’s details, filing annual confirmation statements and dormant company accounts, and updating statutory records for public inspection.

How to Report for Dormancy

Companies who wish to declare dormancy or switch their status from active to inactive may do so by contacting the HMRC’s Corporation Tax office. You can find their contact details on the UK government’s official website or any of their issued letters. 

For previously active companies, expect a “Notice to Deliver a Company Tax Return” from HMRC. This must be accomplished for the Corporation Tax accounting period prior to the company becoming dormant. Note that profits made prior to dormancy are subject to corporation tax. 

Before declaring dormant status, ensure that employee payrolls and other outstanding bills have been taken care of. This includes employee wages, shareholder dividends, debits with service providers, and other transactions.

Requirements for Declaring Dormancy

1. Companies House Requirements – You do not have to notify Companies House when declaring dormancy. However, you are required to file an annual confirmation statement and dormant accounts. This will serve as your official notice to Companies House.

a. Accounts

For first accounts with a coverage period of over 12 months, the deadline is 21 months from the date of incorporation. Companies House sends notifications for filing, but it’s best to set your reminder to avoid missed deadlines.

b. Confirmation Statement 

An annual confirmation verifies the company’s critical details during a specific time, including: 

•  
  • Business name
  • Director’s details
  • Registered office address
  • SAIL address (if applicable)
  • Company secretary details (if applicable)
  • Shareholders’ details
  • Details on issued shares

The first confirmation statement must be submitted 12 months after the company’s date of incorporation. Succeeding statements will be delivered 12 months after the previous statement’s confirmation date.

2. HMRC Requirements

Previously active businesses are required to file a Company Tax Return with the HMRC. Companies dormant since the beginning are exempted from this rule. 

After notifying HMRC, you will receive a Notice to deliver a Company Tax Return. This helps you identify the amount of Corporation Tax that needs to be paid prior to declaring dormancy status.

Work with a Trusted Company Formation Agency

Filing for dormancy can be made simple with the help of trusted experts. Companies Made Simple offers a fast and reliable way to declare dormancy. We offer multiple packages to suit your needs and budget. 

Learn more about our dormant company accounts packages.

FAQs

What is a dormant company in the UK?

A dormant company is a limited company that is registered with Companies House but is not actively trading and has had no significant accounting transactions in a financial year. Essentially, it exists legally but carries out no business activity or income-generating operations.

Why might I make my limited company dormant instead of closing it down?

Putting your company into dormant status lets you keep the business name, protect your brand, or pause trade without fully dissolving the company. It reduces ongoing costs and administrative burden while you decide on future use.

What transactions are allowed when a company remains dormant?

Only minimal transactions are allowed so the company retains its dormancy. These include:

• Payment for shares at incorporation.
• Filing fees to Companies House.
• Late-filing penalties.

Any other transaction (for example bank interest, wages, or sales) will normally revoke the dormant status.

What filings and obligations does a dormant company still have?

Even if dormant, your company must:

• File a confirmation statement annually with Companies House.
• Submit dormant company accounts by the deadline.
• Inform HM Revenue & Customs you are dormant for Corporation Tax if required.

Failure to comply could trigger penalties.

What happens when my dormant company starts trading again?

Once your company carries out any business activity or receives income, you must treat it as active. This means:

• Inform HMRC and/or Companies House if required.
• Begin preparing full annual accounts and Corporation Tax returns.
• Ensure normal obligations apply from the moment trade resumes.

What is the difference between a dormant company and a non-trading company?

• A dormant company has no significant accounting transactions (only minimal permitted items) during the year.
• A non-trading company may not actively trade but still has financial transactions (like bank fees, interest, or asset transfers) and so does not qualify as dormant for accounting purposes.