If you have a dormant company, you may receive a letter from HMRC asking you to confirm that no tax is due. You may need to do this even if you have already told HMRC that your company is dormant.
Key dates
Company accounts must be filed with Companies House within nine months of the end of the accounting period. Any corporation tax due for the period must be paid nine months and one day after the year-end. However, companies have 12 months from the end of the accounting period in which to file their company tax return with HMRC.
This note explains when your company will be treated as dormant and what action you need to take.
When is a company ‘dormant’?
Your company may be ‘dormant’ if you are not doing any business and your company does not have any other income, for example, from investments. The meaning of ‘dormant’ for tax purposes is different from that for accounting purposes.
Dormant for corporation tax
HMRC considers a company to be dormant if it is not ‘active’. A company will be active if it is carrying on a business activity, it is trading or receiving income.
Your company will be dormant for corporation tax purposes if:
- it has stopped trading and has no other income.
- it is a new limited company which has yet to start trading.
- it is an unincorporated association or club which owes less than £100 in corporation tax; or
- it is a flat management company.
A company that is dormant is not liable for corporation tax.
If you think your company is dormant, you can tell HMRC online (see www.gov.uk/tell-hmrc-your-company-is-dormant-for-corporation-tax). If you cannot use the online form, you can also tell HMRC by post or by phone.
If you have received a notice to deliver a company tax return, you will need to do this. This will show HMRC that your company is dormant. Once you have told HMRC that your company is dormant, you will not need to file further company tax returns unless you receive a notice to file.
You may also receive a letter from HMRC telling you that they have decided to treat your company as dormant and that you do not have to file company tax returns.
Dormant for Companies House
Even if your company is not active, you still need to file your confirmation statement with Companies House and file accounts with them. You can file dormant company accounts if your company is dormant and qualifies as ‘small’.
Your company will be considered ‘dormant’ by Companies House if there are no significant transactions in the year. ‘Significant transactions’ do not include filing fees paid to Companies House, any penalties charged for the late filing of accounts, and money paid for shares when the company was incorporated.
Telling HMRC that no corporation tax is due.
Despite having told HMRC that your company is dormant, you may receive a letter from them reminding you when the corporation tax for the period is due. The letter will also inform you that if you do not owe any corporation tax, you should tell HMRC as soon as possible. The letter warns that if you do not tell HMRC that no corporation tax is due, you will continue to receive payment reminders.
To tell HMRC that no corporation tax is due, and put a stop to payment reminder letters, you need to visit the Gov. UK website at www.gov.uk/pay-corporation-tax and select ‘tell HMRC no amount is due’. It is simply a case of clicking on the ‘nil to pay form’ and entering your 17-digit corporation tax reference, which can be found in the letter. This will be your company’s 10-digit unique taxpayer plus additional digits and letters that indicate the period in question, for example, 1234005678A00101A. It is important that the reference is entered correctly.
Please call if you need help with any of the issues raised in this alert on 01473 744700.
To see another An Accounting Gem blog check out this link: https://www.aag-accountants.co.uk/hmrc-deadlines-october-2023/
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