Dive into the world of PAYE investigations. Uncover the facts, implications, and insights in this informative blog
Every company within the UK is obliged to submit its accounts on an annual basis to Companies House. The type of accounts that need to be filed will depend on whether the company has been trading over the past year or not.
For companies that have not been trading over the previous year, Dormant Company Accounts must be filed. These dormant accounts give Companies House the confirmation that it needs that your business has not been trading. Companies that have been trading must file their trading accounts instead.
When Do Dormant Accounts Need To Be Filed?
Usually, companies are required to file their accounts on the last day of its anniversary month so, for example, if a company was incorporated on 10th May 2022 its accounts would be due to be filed on 31st May 2023. The company then has a further nine months from the due date for the accounts, i.e., 31st May 2023, on which to file their accounts within their deadline. The only exception is the first set of accounts which cannot be longer than 18 months so the first deadline will be 9th May 2023.
Should the accounts not be filed within that period, the company will no longer be in good standing. It could also incur penalties; therefore timely filing is always essential. However, it is important to note that companies can change their accounting reference date i.e., the due date for the filing of their accounts. This will not extend the first deadline of 9th May 2023, however.
Why Do Companies Need To Be Marked As Dormant?
Marking a company as dormant reduces its yearly tasks since there is no need for filing its accounts with HMRC typically for a period of five years (*sometimes HMRC will ask for the tax return to be filed or even issue a late filing penalty so we normally advise to simply file the dormant return to avoid the confusion risk and having to appeal the penalty). If companies are not trading, they must be marked with HMRC as being Dormant. When a company is marked as Dormant, it updates the records held by HMRC and filing company tax returns each year will no longer be necessary.
Every company is registered automatically to receive a reminder about their company tax return each year. If you receive a reminder, that means you must file your tax return. Companies that are Dormant have no requirement to file a tax return.
What Will Happen If I Fail To Mark A Company As Being Dormant?
Should your company not trade but you fail to mark it with HMRC as being dormant, you will be sent a reminder to file your company tax return by HMRC by post. They will ask you to file your company tax return and failure to do so on time will end cause your company to receive a financial penalty. For this reason, if your company has not been trading for the past tax year you should always mark it with HMRC as being dormant straight away.
What About Filing Accounts With Companies House?
Although you do not need to file a tax return for your dormant company with HMRC, you do need to deliver your company’s annual accounts to Companies House every year along with a confirmation statement, which is a separate filing. This applies even if your company is dormant.
The directors of the company have a legal responsibility not only for running the organisation but also for ensuring its company reports and accounts have been prepared correctly and filed in a timely manner. While dormant companies are often not at the front of the directors’ minds, they are still required to file its annual accounts each year and send confirmation statements to Companies House, even if no business activities have been conducted and no income received.
When Is A Company Considered To Be Dormant?
A company is deemed to be dormant when it is not doing any business and has no other income such as from investments. It is important to note that the term “dormant” means something different for company tax returns and corporation tax and Companies House annual filings.
Companies are deemed by Companies House to be dormant when they have had no accounting transactions that are considered to be significant within the accounting period. Significant accounting transactions are ones that the company is required to enter into its accountancy records.
What Do Significant Transactions Not Include?
The following are not deemed to be significant transactions by Companies House:
- Any filing fees that have been paid to Companies House.
- Any penalties paid for filing accounts later than their deadline.
- Any money paid out for shares at the time of the incorporation of the company.
Should no significant transaction have taken place, the company is deemed to be dormant. For companies that are both dormant and qualified as small, dormant accounts can be filed without a report from an auditor.
Do I Need To Pay To File Dormant Accounts?
It is free to file dormant accounts. There are only costs to pay when a dormant company does not file its accounts on time. In such cases, a late filing penalty will be incurred. If company directors fail to comply with their responsibilities in this regard, they can be fined and the company may, in cases of serious breaches of responsibility, be struck off the register.
Do I Need To Let Companies House Know When My Business Begins Trading Again?
There is no need to inform Companies House when a company restarts trading since its next set of accounts filed will prove the company is dormant no longer. When dormant companies are not needed any longer, its directors may opt to close the company. Companies House has an online service that allows directors to make an application to dissolve and strike off a company quickly and conveniently.
How Do I File Dormant Accounts With Companies House?
Before you can file your dormant company accounts with Companies House, you will need the password and email address that you used when signing up for the WebFiling service offered by Companies House. You will also need an authentication code sent to you by Companies House.
If you have never filed before, it is possible to register to file online. All you need is an email address and a password. After registering, Companies House will send out an authentication code by mail to the company’s registered office. A reminder can be sent out if you already have a code for your company by cannot find or remember it. The code will arrive within around five days. Codes cannot be provided over the telephone or via email for security reasons.
If you file dormant accounts then HMRC may resist registering the company for VAT initially. Also, a bank may refuse to open an account for that business or close an existing account until the business starts to trade again which may require a new set of account to be filed first. Suppliers and customers may be cautious to trade with a dormant company and so you may want to file accounts which have one or two transactions in it like bank and accounting fees in order to avoid these issues.