Is a UK company dormant? Test Companies House and HMRC separately
A UK private company made no sales all year, and someone suggests filing it as dormant. Two authorities ask two different questions here. Companies House asks whether the company had any significant accounting transactions in the financial year. HMRC asks whether the company traded or had other income for Corporation Tax. A company can pass one test and fail the other. Annual accounts and confirmation statements stay due at Companies House either way, so classify every transaction against each test to choose the correct accounts route and to identify any outstanding Company Tax Return for HMRC.
The Companies House test looks at transactions
For Companies House, a company is dormant if it has no significant accounting transactions during the financial year. The Companies House accounts guidance lists the transactions that can be disregarded: payments for shares taken by the subscribers on incorporation, specified fees paid to the registrar, and civil penalties for filing accounts late.
Anything else needs a closer look. Ordinary bank charges are not among those exceptions. Under the rule as written, a bank charge that the company incurs and has to record in its books counts as a significant accounting transaction, however small it is and even though nobody chose to spend the money.
This test concerns entries in the accounting records, not sales. A company with no customers and no turnover can still fail it.
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The HMRC test looks at trading and income
HMRC's guidance says a company is usually dormant for Corporation Tax if it has stopped trading and has no other income, or if it is a new company that has not started trading. HMRC's idea of activity is wider than selling goods or services. Renting out property, advertising, employing people and receiving interest can all count.
Interest deserves particular attention. A small credit on a company deposit account can affect HMRC status even when the company has otherwise done nothing.
Notices matter as much as activity. HMRC's guidance says that if the company has already filed a Company Tax Return, or has received a notice to deliver one, it still needs to file a return for the relevant period. A return that has already been filed does not need to be sent again. Once HMRC has been told the company is dormant, no further return is needed unless HMRC sends another notice. None of this changes the Companies House side. Annual accounts and confirmation statements are still due.
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Hypothetical: one bank charge
Hypothetical: a UK private company limited by shares has never traded. During the whole financial year, its only events are the payment for its subscriber shares and a Companies House fee for its confirmation statement. It has no other income, expenses or obligations.
Both items fall within the transactions Companies House disregards. On their own, they do not stop the company being dormant for Companies House purposes.
Now change one fact. The bank deducts a £12 charge from the company account, and the company has to record it. That charge sits outside the listed exceptions, so the year no longer has zero significant accounting transactions.
The bank charge does not answer the HMRC question. The company still needs a separate check of whether it traded, earned income such as interest, or received a notice to deliver a Company Tax Return.
What dormancy changes at Companies House
A small company that is dormant for Companies House can file dormant accounts. It cannot skip accounts altogether. Annual accounts and confirmation statements remain required whether the company is dormant for Companies House, for HMRC or for both.
The paper form AA02 offers a narrow route for dormant accounts. It is limited to qualifying companies limited by shares that have never traded and whose only transaction in the accounting records is the subscriber shares. A company that became dormant after trading cannot use it, and neither can a dormant subsidiary. Those companies need appropriately prepared dormant accounts.
Dormancy also leaves other questions open. Dissolving the company, deregistering for VAT, closing a PAYE scheme, dormant-subsidiary exemptions and audit eligibility outside the small-company case each need their own decision.
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Classify the year before changing the task list
Keep one task list for Companies House and another for HMRC. The Companies House list keeps its annual accounts and confirmation statement tasks whatever the dormancy result. If you plan to use AA02, record why the company meets its conditions. On the HMRC list, remove only future Company Tax Return tasks, and only once HMRC dormancy has been dealt with and no outstanding notice still requires a return.
- Start with the full year of bank statements and the nominal ledger, including charges and interest.
- Mark each entry either as a Companies House exception or as a transaction that needs recording.
- Then, as a separate exercise, note any trading, renting, advertising, staff costs or interest, along with evidence of when trading started or stopped.
- File HMRC correspondence alongside, including any dormancy acknowledgement and any notice to deliver a return.