{"id":137,"date":"2023-12-29T13:56:18","date_gmt":"2023-12-29T13:56:18","guid":{"rendered":"https:\/\/businassist.com\/blog\/?p=137"},"modified":"2025-12-18T18:32:07","modified_gmt":"2025-12-18T18:32:07","slug":"dormant-company","status":"publish","type":"post","link":"https:\/\/businassist.com\/blog\/dormant-company\/","title":{"rendered":"What is a Dormant Company? (A Complete Guide)"},"content":{"rendered":"<p><a href=\"https:\/\/businassist.com\/blog\/wp-content\/uploads\/2023\/12\/What-is-a-Dormant-Company.png\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-138\" src=\"https:\/\/businassist.com\/blog\/wp-content\/uploads\/2023\/12\/What-is-a-Dormant-Company.png\" alt=\"What is a Dormant Company\" width=\"2240\" height=\"1260\" srcset=\"https:\/\/businassist.com\/blog\/wp-content\/uploads\/2023\/12\/What-is-a-Dormant-Company.png 2240w, https:\/\/businassist.com\/blog\/wp-content\/uploads\/2023\/12\/What-is-a-Dormant-Company-300x169.png 300w, https:\/\/businassist.com\/blog\/wp-content\/uploads\/2023\/12\/What-is-a-Dormant-Company-1024x576.png 1024w, https:\/\/businassist.com\/blog\/wp-content\/uploads\/2023\/12\/What-is-a-Dormant-Company-768x432.png 768w, https:\/\/businassist.com\/blog\/wp-content\/uploads\/2023\/12\/What-is-a-Dormant-Company-1536x864.png 1536w, https:\/\/businassist.com\/blog\/wp-content\/uploads\/2023\/12\/What-is-a-Dormant-Company-2048x1152.png 2048w\" sizes=\"auto, (max-width: 2240px) 100vw, 2240px\" \/><\/a><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Post Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #1e73be;color:#1e73be\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #1e73be;color:#1e73be\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/businassist.com\/blog\/dormant-company\/#UK_LTD_COMPANY_FORMATION_FOR_UK_AND_NON_UK_RESIDENTS_FROM_ONLY_099_INC_VAT_ONE_OFF_FEE_SIGN_UP_NOW\" >UK LTD COMPANY FORMATION FOR UK AND NON UK RESIDENTS FROM ONLY \u00a30.99 INC VAT ONE OFF FEE SIGN UP NOW<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/businassist.com\/blog\/dormant-company\/#Lets_Start_with_Dormant_Company_Meaning\" >Let\u2019s Start with Dormant Company Meaning<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/businassist.com\/blog\/dormant-company\/#What_Are_the_Reasons_Behind_Making_a_Company_Dormant\" >What Are the Reasons Behind Making a Company Dormant?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/businassist.com\/blog\/dormant-company\/#Things_to_Avoid_While_Setting_Up_Dormant_Company\" >Things to Avoid While Setting Up Dormant Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/businassist.com\/blog\/dormant-company\/#What_Information_Is_Required_by_Companies_House\" >What Information Is Required by Companies House?<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/businassist.com\/blog\/dormant-company\/#End_Notes_%E2%80%93_BusinAssist_to_the_Rescue\" >End Notes &#8211; BusinAssist to the Rescue!<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/businassist.com\/blog\/dormant-company\/#FAQs\" >FAQs<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"UK_LTD_COMPANY_FORMATION_FOR_UK_AND_NON_UK_RESIDENTS_FROM_ONLY_099_INC_VAT_ONE_OFF_FEE_SIGN_UP_NOW\"><\/span>UK LTD COMPANY FORMATION FOR UK AND NON UK RESIDENTS FROM ONLY \u00a30.99 INC VAT ONE OFF FEE <a href=\"https:\/\/businassist.com\/uk-ltd-company-formation.php\">SIGN UP NOW<\/a><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Are you a budding entrepreneur? Did you end up on our blog looking for <strong>Dormant Company meaning? <\/strong>If you answered \u201cyes\u201d to one or both of the questions, we\u2019re here to the rescue today!<\/p>\n<p>We are <a href=\"https:\/\/businassist.com\/\">BusinAssist<\/a> &#8211; your go-to company for all your business needs. Our team is here to help business enthusiasts, like yourself, set up their dream pursuit ASAP!<\/p>\n<p>Many times, people confuse a dormant business with one that is &#8220;closed&#8221; or &#8220;obsolete.&#8221; However, it\u2019s a completely different scenario. An <strong>HMRC dormant company<\/strong> is something that is not generating revenue and, therefore, cannot be considered for corporate taxes.<\/p>\n<p>Now, how does HMRC determine what company is dormant and how long does a company has to be in this state to be declared \u201cdormant\u201d? Fortunately, we chose this topic to answer all of your doubts today about a <strong>dormant company meaning. <\/strong>So, let\u2019s get started!<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Lets_Start_with_Dormant_Company_Meaning\"><\/span>Let\u2019s Start with Dormant Company Meaning<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>A company is regarded as \u201cdormant\u201d if it is NOT doing any business or earning any income from business. However, it MUST be officially registered with Companies House and can be dormant from the date of its formation, or even after the start of active business.<\/p>\n<p>As a result, a company that has stopped doing business, and informed HMRC about it, will be considered dormant (or inactive) for the purpose of <a href=\"https:\/\/en.wikipedia.org\/wiki\/Corporate_tax\">corporation tax<\/a>.<\/p>\n<p>To consider what falls in the category of dormant activities, we need to understand what are trading activities. So, here\u2019s a list of everything that are considered as \u201ctrading\u201d and is taxable by the HMRC.<\/p>\n<ul>\n<li>Purchasing and selling goods and\/or services<\/li>\n<li>Property leasing or buying<\/li>\n<li>Employing people outside the initial group of directors<\/li>\n<li>Paying directors\u2019 salaries<\/li>\n<li>Issuing shareholder dividends<\/li>\n<li>Receiving dividend payments<\/li>\n<li>Management of investments<\/li>\n<li>Earning interest on\/or paying bank charges<\/li>\n<li>Using the business bank account to pay accounting or legal fees<\/li>\n<\/ul>\n<p>So, if you are doing any of these activities inside your company, it cannot be declared &#8220;dormant.\u201d Because, at this point, the HMRC does not care if you are generating any revenue or paying out the team from your pocket. Any transaction happening inside the business will be taken care of as taxable.<\/p>\n<p>A <strong>dormant company<\/strong> can, however, conduct certain transactions and activities, such as:<\/p>\n<ul>\n<li>Payment of shares by the initial shareholders who joined the business at the time of incorporation<\/li>\n<li>Amounts paid to Companies House as fees and charges for <a href=\"https:\/\/businassist.com\/confirmation-statement-filing-service.php\">submitting an annual confirmation statement<\/a>.<\/li>\n<li>Settlement of any <a href=\"https:\/\/businassist.com\/blog\/companies-house-late-filing-penalties\/\">penalties for late filing with Companies House<\/a><\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"What_Are_the_Reasons_Behind_Making_a_Company_Dormant\"><\/span>What Are the Reasons Behind Making a Company Dormant?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Here, we are with a good question now! While a company may be registered and technically active, its operational activities are temporarily suspended. A business may enter a dormant state on the day of incorporation or may do so following a period of trading activity.<\/p>\n<p>A company may be dormant for a variety of reasons, including the following:<\/p>\n<ul>\n<li>keeping a company name reserved while getting ready to start the business<\/li>\n<li>keeping a <a href=\"https:\/\/businassist.com\/blog\/trade-name-vs-company-name\/\">trade name<\/a> safe to stop another company from registering it<\/li>\n<li>restructuring a formerly active business<\/li>\n<li>when an owner has to take a long leave of absence for any reason, including illness, maternity leave, travel, a sabbatical, or another circumstance<\/li>\n<\/ul>\n<p>Your company can become dormant at any time, but you will still have to meet several legal obligations to Companies House and inform HMRC as soon as possible. This involves filing yearly confirmation statements and dormant company accounts, reporting changes to your company\u2019s information, and maintaining statutory records that are current and accessible for public inspection.<\/p>\n<p>Furthermore, if any of the following applies to your business, it will be dormant for Corporation Tax purposes:<\/p>\n<ul>\n<li>a new limited company, yet to begin trading<\/li>\n<li>an unincorporated association\/club that owes less than \u00a3100 in corporation tax<\/li>\n<li>a flat management company<\/li>\n<\/ul>\n<p>Your business must not be carrying on a trade, and it must be wholly owned by its members. If your unincorporated business is operating but complies with the following two requirements, HMRC may consider it dormant for Corporation Tax purposes:<\/p>\n<ul>\n<li>The annual Corporation Tax liability of your organisation does not\/is not expected to be over \u00a3100<\/li>\n<li>Your club\/organisation runs exclusively for the benefits of its members<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Things_to_Avoid_While_Setting_Up_Dormant_Company\"><\/span>Things to Avoid While Setting Up Dormant Company<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Setting up and maintaining a <strong>dormant company<\/strong> can be a strategic move, but it&#8217;s crucial to avoid certain activities that could inadvertently wake the tax beast. To ensure your <strong>dormant limited company<\/strong> remains exempt from Corporation Tax, steer clear of these three key pitfalls:<\/p>\n<p><strong>Trading Losses:<\/strong><\/p>\n<p>While a dormant company isn&#8217;t actively trading, it&#8217;s important to remember that any allowable trading losses incurred before dormancy cannot be carried forward. So, you have to make sure there is no trading activity during your pre-dormancy period to optimise future tax benefits, as these losses are effectively lost during the dormant time.<\/p>\n<p><strong>Assets on the Auction Block:<\/strong><\/p>\n<p>Disposing of assets during dormancy can trigger a chargeable capital gain, effectively jolting your company awake for tax purposes. Hold onto those valuable possessions until your business reawakens, or consider restructuring ownership to avoid the tax sting.<\/p>\n<p><strong>The Sweet Slumber of Tax-Deductible Interest:<\/strong><\/p>\n<p>While certain interest payments and annual payments may be tax-deductible for active businesses, claiming them during dormancy can be a rude awakening. These deductions can inadvertently push your company above the \u00a3100 Corporation Tax threshold, shattering the peaceful slumber of dormancy.<\/p>\n<p>HMRC, however, will not regard your business as dormant if any of the following situations hold true:<\/p>\n<ul>\n<li>Your organisation is a privately held club that is operated as a for-profit business by its members<\/li>\n<li>According to the Housing Act of 1986, your company is a housing association, or you are a registered social landlord<\/li>\n<li>Your organisation is a trade association<\/li>\n<li>Your organisation is a thrift fund<\/li>\n<li>Your organisation is a holiday club<\/li>\n<li>Your organisation is a friendly society<\/li>\n<li>Your company is either fully owned by or a subsidiary of a charitable organisation<\/li>\n<\/ul>\n<p>In the case of a <strong>dormant company<\/strong>, HMRC will send you a letter notifying you of your Corporate Tax exemption and\/or the fact that you are not required to file any Company Tax Returns.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_Information_Is_Required_by_Companies_House\"><\/span>What Information Is Required by Companies House?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>An <strong>HMRC dormant company <\/strong>must <a href=\"https:\/\/businassist.com\/confirmation-statement-filing-service.php\">submit a confirmation statement<\/a> and dormant accounts to Companies House annually. The accounts comprise a balance sheet along with any relevant notes. These can be mailed (using form AA02) or submitted online to Companies House.<\/p>\n<p>The annual confirmation statement, formerly called the &#8220;annual return,&#8221; is a record that lists and verifies significant company information. It also includes information that is required for dormant companies. The statement includes the following:<\/p>\n<ul>\n<li>Your company\u2019s name<\/li>\n<li>The <a href=\"https:\/\/businassist.com\/blog\/registered-office-address-service-london-uk\/\">registered office address<\/a><\/li>\n<li>SAIL address (if applicable)<\/li>\n<li>Details of company directors<\/li>\n<li>Details of company secretary (if appointed)<\/li>\n<li>Details of shareholders<\/li>\n<li>The location of statutory company records<\/li>\n<li>Information regarding issued shares<\/li>\n<li>Information about people with significant control (PSCs)<\/li>\n<li>Nature of business activities (<a href=\"https:\/\/businassist.com\/blog\/how-to-change-sic-code-on-companies-house\/\">Standard Industrial Classification \u201cSIC\u201d code<\/a>)<\/li>\n<\/ul>\n<p>One thing to keep in mind is that a dormant company&#8217;s SIC code is 99999. Your SIC code needs to be updated on the following <a href=\"https:\/\/businassist.com\/blog\/what-is-a-confirmation-statement-and-causes-of-overdue\/\">confirmation statement<\/a> if your business stops trading or goes into dormancy after a period of activity.<\/p>\n<h4><span class=\"ez-toc-section\" id=\"End_Notes_%E2%80%93_BusinAssist_to_the_Rescue\"><\/span>End Notes &#8211; BusinAssist to the Rescue!<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>You may choose to maintain an <strong>HMRC dormant company <\/strong>to save on corporate taxes while you want to hold on to that company name. It is quite a strategic thing to do. However, there are many restrictions and too much paperwork to maintain this position. Don\u2019t worry, BusinAssist is here to help you.<\/p>\n<p><a href=\"https:\/\/businassist.com\/\">BusinAssist<\/a> is a top provider of Global Business Support Solutions. We offer support services to start up, <a href=\"https:\/\/businassist.com\/blog\/digital-transformation-small-businesses\/\">small to medium sized business<\/a> and also to big multinational groups and companies.<\/p>\n<p>We offer a wide range of support services to our clients which include International <a href=\"https:\/\/businassist.com\/uk-ltd-company-formation.php\">Company Formation<\/a> and Company Secretarial Services. <a href=\"https:\/\/businassist.com\/uk-ltd-company-formation.php\">Setting up a company<\/a> can be complex, as can be keeping up with statutory filing obligations.<\/p>\n<p>Visit our website and <a href=\"https:\/\/businassist.com\/contactus.php\">contact us<\/a> to find out more about our services today!<\/p>\n<h4><span class=\"ez-toc-section\" id=\"FAQs\"><\/span>FAQs<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p><strong>Q: What is the difference between dormant and inactive companies?<br \/>\nAns: <\/strong>A firm that does not do anything and does not have any other money sources, such as money from investments, may be called inactive. A business may stop working for various reasons. A business may become dormant right after it is started or it may go inactive after being around for a while. Dormancy is essentially the transition stage between incorporation or active to becoming inactive.<strong>\u00a0<\/strong><\/p>\n<p><strong>Q: What is a 99999 dormant company?<br \/>\nAns:\u00a0<\/strong>A dormant business is designated by the SIC code 99999. This informs the Companies House that you intend to leave this company dormant for the financial year.<strong>\u00a0<\/strong><\/p>\n<p><strong>Q: Who is eligible for dormant company?<br \/>\nAns: <\/strong>In order for a company to be declared eligible for dormant status in the first place, it must not have been the subject of any order, investigation, or inspection. The Company cannot be the recipient of any outstanding secured or unsecured loans. The Company must not have made a mistake in paying workers&#8217; wages.<strong>\u00a0<\/strong><\/p>\n<p><strong>Q: What is the maximum limit for a dormant company?<\/strong><strong style=\"font-size: 1.125rem;\"><br \/>\nAns: <\/strong>A company can remain dormant for a maximum of 5 years at a stretch. After 5 years, a registrar may strike off that company\u2019s name from the incorporation list and officially remove its business licence.<strong>\u00a0<\/strong><\/p>\n<p><strong>Q: Can a director resign from a dormant company?<\/strong><strong style=\"font-size: 1.125rem;\"><br \/>\n<\/strong><strong>Ans:<\/strong> A director of a company may be chosen both during and after the company&#8217;s formation. Similarly, at any time following incorporation, directors may step down or be removed.<strong>\u00a0<\/strong><\/p>\n<p><strong>Read Also:<\/strong><\/p>\n<ul>\n<li><a href=\"https:\/\/businassist.com\/blog\/companies-house-default-address\/\" rel=\"bookmark\">Everything You Need to Know About Companies House Default Address<\/a><\/li>\n<li><a href=\"https:\/\/businassist.com\/blog\/difference-between-a-sole-trader-and-a-limited-company-explained\/\" rel=\"bookmark\">Difference Between a Sole Trader and a Limited Company Explained<\/a><\/li>\n<li><a href=\"https:\/\/businassist.com\/blog\/what-is-an-eori-number\/\" rel=\"bookmark\">What is an EORI Number? \u2013 A Guide<\/a><\/li>\n<li><a href=\"https:\/\/businassist.com\/blog\/difference-between-partnership-and-limited-company\/\" rel=\"bookmark\">What is the Difference Between a Partnership (LLP) and Limited Company (LTD)?<\/a><\/li>\n<li><a href=\"https:\/\/businassist.com\/blog\/can-i-change-my-limited-company-name\/\" rel=\"bookmark\">Can i Change my Limited Company Name: The Ultimate Guide<\/a><\/li>\n<li><a href=\"https:\/\/businassist.com\/blog\/companies-house-reforms\/\" rel=\"bookmark\">Details of Companies House Reforms Planned in the UK in 2024<\/a><\/li>\n<li><a href=\"https:\/\/businassist.com\/blog\/how-to-register-a-company-in-the-uk\/\" rel=\"bookmark\">How to Form a UK Company as a Non-UK Resident? \u2013 A Complete Guide<\/a><\/li>\n<li><a href=\"https:\/\/businassist.com\/blog\/what-is-a-minute-book\/\" rel=\"bookmark\">What Is a Minute Book? Key Corporate Recordkeeping Explained<\/a><\/li>\n<li><a href=\"https:\/\/businassist.com\/blog\/how-to-buy-a-business-with-no-money-uk\/\" rel=\"bookmark\">How to Buy a Business with No Money: Creative Financing Strategies for Entrepreneurs<\/a><\/li>\n<\/ul>\n<p><script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"FAQPage\",\n  \"mainEntity\": [{\n    \"@type\": \"Question\",\n    \"name\": \"What is the difference between dormant and inactive companies?\",\n    \"acceptedAnswer\": {\n      \"@type\": \"Answer\",\n      \"text\": \"A firm that does not do anything and does not have any other money sources, such as money from investments, may be called inactive. A business may stop working for various reasons. A business may become dormant right after it is started or it may go inactive after being around for a while. 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Similarly, at any time following incorporation, directors may step down or be removed.\"\n    }\n  }]\n}\n<\/script><\/p>\n\n\n<div class=\"kk-star-ratings kksr-auto kksr-align-right kksr-valign-bottom\"\n    data-payload='{&quot;align&quot;:&quot;right&quot;,&quot;id&quot;:&quot;137&quot;,&quot;slug&quot;:&quot;default&quot;,&quot;valign&quot;:&quot;bottom&quot;,&quot;ignore&quot;:&quot;&quot;,&quot;reference&quot;:&quot;auto&quot;,&quot;class&quot;:&quot;&quot;,&quot;count&quot;:&quot;5&quot;,&quot;legendonly&quot;:&quot;&quot;,&quot;readonly&quot;:&quot;&quot;,&quot;score&quot;:&quot;4.6&quot;,&quot;starsonly&quot;:&quot;&quot;,&quot;best&quot;:&quot;5&quot;,&quot;gap&quot;:&quot;5&quot;,&quot;greet&quot;:&quot;Rate this post&quot;,&quot;legend&quot;:&quot;4.6\\\/5 - (5 votes)&quot;,&quot;size&quot;:&quot;20&quot;,&quot;title&quot;:&quot;What is a Dormant Company? 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