Some companies have been inactive since the day they were formed. Many companies, however, will actively pursue activities for a while, but not the trade side – at least for a period. These businesses may be eligible to become dormant. This is a status where the responsibilities of the current company presentation will be reduced. To become inactive, there are first some things that the company will have to do. First, however, it is worth thinking if it’s right to make your company dormant.
You should also be sure that the best option is not only to dissolve the company. If you are sure that you will not trade again in the future, there is usually little benefit in keeping the company in existence. While latency can greatly reduce the effort and cost involved in maintaining the business, there will still be some time and expenses required.
What should I do for my business to become dormant?
- Pay outstanding bills and cancel others. These prospective business contracts may, for example, include the rental of buildings and equipment, insurance, utilities, telephone and Internet services used previously.
- Reconciling the amounts received as a result of the customers. All payments to be made to customers to deliver products and services.
- Pay the VAT due to HMRC and (usually) cancel the VAT registration of the company.
- Reconcile wages owed to employees and close the scheme company payroll.
While sifting through all documents and data can be time consuming, it is important to, because if you choose to continue paying for utilities or insurance, the company is still active in the eyes of HMRC, so be careful what you choose to delete or shred.
How do I tell HMRC my company is now inactive?
To confirm with HMRC, you should contact your Local Tax Office, indicating the date on which the company has been, or will be, inactive.
HMRC then go to their head office with a “Notice to a provider of Declaration.” This refers to the duration of activity immediately before the company became dormant. You must complete and file the return and pay any tax due.
HMRC will normally confirm in writing within three weeks. From the date your company is dormant, HMRC stop treating your business as active – this means that you will not receive a lot of correspondence from them and in most cases, you will not need to, until the re-trading of the company (if you choose to) begins.
Do you need to inform Companies House?
You do not have to tell Companies House that your business is inactive until it is time to establish your accounts to them. Remember, the full accounts for the period must be presented as usual.
For the first full year for which the company is inactive, you need to present the simplified accounts within 9 months of the accounting reference date. This can greatly reduce the administration and preservation of the company and is the reason many people make their business inactive.
On a continuous basis, dormant companies must remain a number of other Companies House filing requirements, including:
- The annual return, which differs from the accounts, but must still be submitted.
- When a new director or secretary of the company was appointed or terminated an appropriate form needs to be sent off.
- The changes in the registered office of the Company or, if available, a SAIL address should be submitted on the form.
What if the dormant company will be active again?
Most dormant companies will become active again at some point in their lives. If your company is (for example, starting with trade), then you must notify actively within three months. The easiest way is to contact HMRC and inform them that the company is now active. There is also an online registration service of HMRC
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