Last Updated on May 15, 2022 by Aaron Thompson
What is a Dormant Company
A dormant company is any firm or organization that is not conducting business and has no other sources of income. Every firm must keep accurate financial records that show how much money is coming in and going out of the company. Anyone can apply to be dormant when this flow of money ceases.
Why Register a Dormant Company
Though it appears to be a simple question, the answer is not that easy because there are various reasons why a corporation may opt to remain dormant. Among these causes are the following:
-Keeping a trademark or brand name protected
-Keeping a company name in reserve for future usage
-To store intellectual property or assets
Why Should I Make My Company Dormant Instead of Closing It?
The first step is to determine what it means to you and your company if you decide to keep it open rather than shut it down. This will help you decide whether to pursue this option.
There are various reasons why you might wish to step away from operating your business. It’s essential to understand how putting your company on hold may benefit you.
Save on administration and maintenance costs.
Assume your company is inactive and qualifies as a “small” company. If this is the case, you can file ‘dormant accounts,’ which do not require an auditor’s report.
Payment of Corporation Tax
Corporation Tax is not payable by limited firms that have declared themselves dormant with HM Revenue and Customs (HMRC). However, keep in mind that annual financial statements will still be required.
When can I make my company dormant?
Assume you’re a corporation that has been created and registered with Companies House. In that situation, you can set your business to inactive for one of two reasons: immediately after incorporation or after some time has passed.
Examples of when a company can be dormant are:
- a startup company that has not yet begun trading
- An organization that is no longer in business will be unenrolled from the Company’s Record.
- An ‘off-the-shelf’ or ‘shell’ corporation owned by a business formation agency to sell it. An’ off-the-shelf’ corporation has no assets or obligations and has never done business. It’s a limited company that’s already been pre-registered with Companies House and is looking for a buyer. A “shell” corporation has no operational business or significant assets and operates solely on paper.
How To Make My Company Dormant?
Inform HMRC that your company is dormant
Apply dormant company account easily. This process is relatively simple as well. Suppose your business has ceased operations and has no other revenue. In that case, you can notify HMRC that it is inactive for corporation tax purposes.
Companies who have never received a ‘notice to file a Company Tax Return’ can notify HMRC by phone.
Those who have received this notification or previously submitted a return must file a Company Tax Return online, demonstrating to HMRC that the business is no longer active.
Pay off outstanding bills.
Bills for office space leasing, insurance, web services, and other expenses can all be included in this category. Furthermore, before terminating any current agreements, ensure that all outstanding payments have been made and all estimated costs met.
Deregistering for VAT and closing PAYE
If your dormant business is VAT-registered, you must deregister within 30 days unless you intend to resume operations at some time. In this instance, you should file ‘nil’ VAT returns.
Similarly, unless you intend to restart your firm, you should discontinue your PAYE arrangement.
How Do I Get Money Out of My Dormant Company?
An inactive company’s funds might be used to pay dividends to shareholders. On the other hand, a dormant company cannot pay dividends to stockholders without losing its status as a fixed entity.
Alternative tax-efficient options for extracting any residual money from your dormant organization include:
- Making pension payments on behalf of the company’s directors.
- Repaying outstanding loan amounts to company members.
- Providing investors, the last dividend sum.
How to restart a dormant company
You must first register with HMRC if your business has never traded before. When it comes to revitalizing a dormant enterprise, even if your company has previously made sales, there are four things you should do:
- Inform HMRC that your firm has started registering for corporate tax.
- Accounts must be submitted to Companies House within nine months after the conclusion of your company’s fiscal year.
- Within 12 months of your company’s year-end, submit a Company Tax Return (containing full statutory accounts) to HMRC.
Closing a business down for good is usually the best option if you are convince you will never reopen it. It not only saves you money, but it also relaxes your mind.
If, on the other hand, you’re still undecide about restarting your company, you can alternatively transfer the firm to a new partner while keeping the brand and reputation.
Keep your company dormant if possible. You give yourself more time to decide while minimizing the costs of keeping your business alive and well.