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What is a dormant company vs a nontrading company?

  • 3 min read
  • Last updated 16 May 2024

Differentiating whether you have a dormant company or a non-trading one is based on one small difference. We’ll get into that juicy tidbit and more. Let’s talk all things limited companies and dormant and non-trading activity (or lack thereof). 

What is a dormant company?

A dormant company is a company that has been incorporated at Companies House but does not currently have any business activity. In a nutshell, it’s a company with no income or expenses.

Business activity includes: buying, selling, renting, advertising, employing staff and/or earning interest.

Dormant companies can become dormant straight after they’re incorporated, or after being in business for a while. They don’t need to pay Corporation Tax.

According to HMRC, your company is dormant (a.k.a you don’t have to pay) for Corporation Tax if it’s:

  • Stopped trading and has no other income
  • New and hasn’t started trading
  • An unincorporated association/club owing less than £100 Corp Tax
  • A flat management company

What is a non-trading company?

Similarly to a dormant company, a non-trading company is also one that does not currently have any business activity. Once a company starts and stops trading, then it’s considered a non-trading company.

Differences between a dormant and non-trading company

The main difference is that while non-trading companies are inactive, transactions, like investment income or sale of goods, are still allowed. These are usually happening in the background and not “actively”. A dormant company cannot have transactions.

Another difference arises when you go to file a tax return… or don’t. Dormant companies don’t need to pay Corporation Tax and therefore do not need to file a tax return to HMRC. But, they will need to file dormant accounts with Companies House.

Non-trading companies, on the other hand, will need to do both. Even if you don’t owe corporation tax, you’ll still need to file a company tax return to HMRC and company accounts to Companies House.

Don’t let the world of limited company taxes faze you🚨

If you’re confused whether your company is dormant or non-trading, fret not! Our accredited accountants are here to help you. It’s a smooth-sailing, stress free process. Get started now, thank yourself later.

Can a dormant company trade?

Alas, no. A dormant company cannot trade. This means you cannot carry out any business or make any money through your limited company. 

But sometimes, things change. If you’re planning to jump-start your limited company again, then you’ll need to let HMRC and Companies House know. Or, the easier way would be to get your handy dandy accountant to inform them on your behalf.

When do company accounts need to be filed?

There are two main dates that you need to keep in mind. Another point to highlight is that these dates will be different for everyone depending on when your business’ financial year starts and ends.

  1. You need to file your company tax return to HMRC within 12 months of your accounting period end
  2. You need to file your annual company accounts to Companies House within 9 months after the accounting period end

Fun fact (Okay, that might be a stretch…): if the date you either need to file a tax return or your annual accounts fall on a bank holiday or a Sunday, you still need to submit your documents before this date or you will get penalised by HMRC😱

Here are some example dates:

  • Your accounting period ends on 31st December 2024
  • You have to file your company tax return by 31st December 2025 to HMRC
  • You have to file your annual company accounts by 30th September 2025 to Companies House

Search the Companies House register to find out when your company accounts are due.

How to file dormant company accounts 

A company usually won’t have to pay corporation tax or file a company tax return once you tell HMRC that your company is dormant. The only exception to this is if HMRC gets in touch with you to ask you to file. In this case, you must file.

On the other hand, you will need to submit a confirmation statement and your annual accounts to Companies House.

Luckily, it’s fairly easy to sort! You can sort it all yourself or use an accountant to file your dormant company accounts with Companies House!

Get your limited company taxes sorted, for less✨

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