Avoiding Dissolution: How to Make Your Company Dormant in the UK
- TBA
- Jan 3
- 3 min read
Updated: Mar 13
When running a company, unforeseen challenges can arise, such as prolonged periods of inactivity or zero revenue.
However, if you’re not ready to dissolve or liquidate the company, what can you do?
Here’s our suggestion – consider dormancy.
If your company has had no transactions or ceased trading entirely during the tax year but you don’t wish to close it, many business owners opt to make it dormant.
A dormant company has fewer reporting requirements and is exempt from corporation tax, saving time and money while protecting your interests, such as the business name or intellectual property.
What is a dormant company?
A dormant company is registered with Companies House but does not conduct business, trade, or earn income. It does not:
Buy or sell goods or services,
Earn interest,
Manage investments, or
Engage in other business activities.
According to HMRC, such a company is ‘inactive’ for corporation tax purposes. A company can be dormant from the time it is established or after a period of activity.
What is considered a transaction for a dormant company?
Transactions that classify a company as ‘active’ include:
Buying or selling goods and services
Receiving rental income or property sales revenue
Incurring significant expenses, such as:
Paying employees
Paying directors’ salaries
Distributing shareholder dividends
Managing investments
Receiving dividends
Earning interest
Paying bank fees
Covering formation and accounting costs via a business bank account
Exempt activities
Certain actions do not count as significant accounting transactions and are permitted for dormant companies:
Initial shareholder subscriptions
Fees paid to Companies House for filing confirmation statements, changing the company name, or re-registration
Penalties for late filing with Companies House
How does dormancy save costs?
Opting for dormancy offers several advantages:
Temporary pause:
If you cannot operate the company due to health issues, maternity leave, travel, or other reasons, dormancy lets you preserve company assets, such as property rights or the business name.
Lower administrative costs:
Dormant companies have fewer filing requirements and reduced statutory obligations for small, inactive entities.
Strategic planning time:
Allows you to restructure without the immediate burden of maintaining a trading business.
No time limit:
A company can remain dormant indefinitely.
Cost efficiency:
Dormancy is cheaper than closing and reopening a company.
Future opportunities:
Retain your business name and branding, preventing others from registering them.
Making your company dormant
Evaluate Eligibility: Ensure the company meets dormancy requirements, such as no significant financial transactions. Complete pending transactions or dissolve assets, if necessary.
Prepare Required Information: Gather these details for filing with Companies House:
Company name
Office address
Directors’ names
Shareholders’ names
Provide at least one SIC code (Standard Industrial Classification)
Notify Companies House: Formally inform Companies House of the dormant status. The status will be updated on their website and made publicly accessible.
Inform HMRC: Notify HMRC immediately to avoid unnecessary tax obligations or penalties.
Notify the Bank: If the company has a business bank account, inform the bank of the status change. Some banks offer specialized services for dormant accounts.
Maintain Compliance: Even as a dormant company, you must fulfil specific legal obligations.
Dormant company obligations with Companies House
Annual Accounts:Directors must submit annual dormant accounts to Companies House. These are simpler than active company accounts and typically include only a balance sheet and accompanying notes. Submit them within 9 months of the accounting reference date (ARD).
Confirmation Statements:All companies, active or dormant, must file a confirmation statement at least once every 12 months. This ensures the company’s registered details remain accurate and up-to-date.
The confirmation statement must include:
Company name and registration number
Registered office address
Directors’ and secretaries’ details
Shareholder or guarantor information
SIC codes
Share capital details
PSC (Persons with Significant Control) register
Company’s registered email address
You have 14 days from the due date to submit the statement.
Can Dormant Companies Be Reactivated?
Yes, dormant companies can be reactivated at any time, for any duration. To resume trading, you must:
Notify HMRC of the change
Begin paying corporation tax and fulfilling tax-related responsibilities
Update Companies House with statutory accounts and tax filings as required
Reactivation requires you to:
Register for corporation tax services via your company’s Government Gateway account
Submit statutory accounts and corporation tax returns to HMRC
Some advice from TB Accountants
If you’re planning to pause operations or face temporary financial challenges but see potential for the future, dormancy is a practical solution. It helps preserve your company’s integrity while reducing the administrative burden.
However, even dormant companies must adhere to specific legal procedures, such as filing dormant accounts and confirmation statements. It is important to ensure that you are aware of these obligations, even when your company is dormant.