What does it mean when you have a dormant Limited Company?

Dormant Limited Company

Sometimes Limited Company contractors find that they suspend their contracting activities and put their companies into a dormant state. But what does this actually mean and how do you go about doing it?

 

Laura Hepworth, Director of Operations at Intouch Accounting, helps contractors to run their Limited Companies. Here, she explores what dormant means and what you need to be aware of.

 

What does ‘dormant state’ mean?

In a nutshell, a dormant state simply means the Limited Company is not currently trading, but that does not mean that the company does not have to prepare accounts. The rules for filing accounts with Companies House and for submitting accounts and a Corporation Tax Return still remain.

 

What types of dormant companies are there?

Those who have never traded – If this applies to you, then you will still be required to submit dormant company accounts (DCAs) to Companies House, to advise them of your dormant company. You can only file a DCA if you have never had any transactions through the company.

 

Those who have traded previously – and are now non trading can become dormant if there are no further transactions. If this applies to you, you will continue to have to submit accounts to Companies House and HMRC, as this will report both the current dormant period and the previously trading period as a comparative. Accounts will then need to be filed each year the company remains dormant.

 

If your company has transactions during the year it is not technically dormant, just non trading.

 

Why do contractors have dormant Limited Companies?

A contractor may no longer be actively contracting but wish to keep their company “active” though in a dormant state because they may plan to return to contracting in the foreseeable future or to keep their company name protected.

 

What should you do if you plan to keep a dormant company?

 

  • Avoid making unnecessary transactions
  • Cancel your VAT registration
  • Cancel your PAYE scheme
  • Inform HMRC that the company is no longer trading
  • Consider any funds that are held in the company and whether a bank account is required. Look for a free banking service to avoids bank charges and if you have deposits then any interest will mean your company is not dormant.

 

Speak to your contractor accountant if you need support and guidance on how to do any of the above.

 

How do you put it into a dormant state?

Always let your contractor accountant know of your plans, as they will be able to take you through what needs doing.

 

What happens when you bring your company out of its dormant state?

Nothing! You can start trading again whenever you wish. Again, it’s advisory to inform your contractor accountant of your plans, as if you have cancelled PAYE/VAT schemes, you will have to restart these. Plus, everything can then be discussed to make sure you can start doing what you do best and the administration is all in place for you.

 

How can Intouch Accounting help?

Our team of Personal Accountants are on hand to guide their clients through every stage of their Limited Company’s life, including any periods of dormant state. If you’re looking for that personal service and tailored expert advice, call our team on 01202 375 562 or email us today.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Comprehensive spending review: tax

Tax

Like most other government departments, HM Revenue and Customs (HMRC) is to lose a part of its budget as a result of the spending review.

The Chancellor introduced cuts of 15 per cent in real terms in the tax authority’s spending.
HMRC has been briefed to make the savings through a reduction in admin costs and a more effective targeting of customer services.

Processes that cause the greatest number of errors, such as VAT registrations, are to be redesigned.

The government said that the backlog of PAYE under- or overpayment cases should be cleared by 2012. HMRC will also be conducting the next stage of the consultation on improving the PAYE system, examining how best to manage a real time information process. The purpose is to ease the administrative burden of tax management on employers.

Despite the cuts, HMRC has been granted an extra £900 million over the next four years to tackle the issue of tax avoidance. The plan is that the additional resources will enable HMRC to recover some £7 billion a year in underpaid or unpaid tax by 2014/15.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.