A company that has no transactions and therefore receives no income in a given accounting period is considered a dormant or an inactive company by HMRC. A dormant company is nonetheless required to file dormant accounts to formally inform HMRC of the inactive status of the company and on an annual basis.
The process of filing dormant accounts is straightforward as only a high level of detail is required and if completed online, the process is free and approved quickly by HMRC. But as you are not proactively asked by HMRC to file dormant accounts and the onus is on you to do so at the right time and in the right format, we have provided a guide on how to file dormant company accounts.It is a legal requirement to file dormant accounts to HMRC to confirm that you are not due to pay any corporation tax for the given accounting period, otherwise you will be penalised heavily.
Company Director’s filing responsibilities
The filing responsibilities of a business owner of an unquoted, including sole traders or limited companies, are the same as for quoted companies, i.e. plc companies.
The three main reporting requirements of companies are the completion of an annual corporate tax return, the confirmation statement (see further details below) as well as filing of company accounts. This stands true even if your company is considered dormant or inactive by HMRC.
The good news is that for those business owners who have a dormant company, the process for filing dormant accounts is very simple, which includes the submission of a simplified balance sheet.
Filing process simplified
If you have a dormant company which has never traded and perhaps the only transactions include the issue of shares to company directors, you will still need to file dormant accounts.
The form to complete dormant account is called the AA02 form, found via the HMRC website and can be completed and submitted online for ease.
The form requests the following information to complete the filing of dormant accounts:
- Full legal company name
- Accounting year-end date, which can be checked at Companies House
- Details of any transactions, including any share capital that may still be due by shareholders of the company
- Confirm if the company has any cash held, including cash in hand
- Confirm the company’s net assets, for example, the sum total of share capital due and cash held or in hand
- Any share capital that has been issued to the shareholders of the company
- All company director’s approval and the date of their approval, and
The filing of the AA02 form can completed online and is the recommended course to take as the form will be pre-populated autmotically where possible from HMRC’s system, the verification process is completed at the time of filing, and the turnaround for approval of online filing of dormant accounts by HMRC is much quicker.
When do I file dormant accounts?
The filing of dormant accounts is a yearly process, and the deadline for submission is within 9 months of company’s incorporation date.
HMRC do proactively send reminder letters and you can also set up an automatic email reminder with HMRC, so you never miss the deadline.
The filing of dormant accounts with HMRC does not incur any costs, unlike the filing of company accounts for active companies.
However, if you do file dormant accounts late, you will be subject to HMRC penalties, with a risk of the company being struck off if the filing of dormant accounts is not completed.
The Confirmation Statement, previously known as the ‘annual return’, is another annual reporting requirement for companies, including for dormant or inactive companies. The Confirmation Statement is a snapshot of a company in a given time period, verifying company data to include on the Companies House register.
Again, like the filing of dormant accounts, the filing of the annual Confirmation Statement for dormant companies is straightforward.
A confirmation statement is complete via the CS 01 form and can be completed online directly with HMRC for ease.
You will require the following information for completing the form:
- Full company registered address
- All registered company director’s details, including the company secretary, if relevant
- Overview of the share structure of the company, and any additional shareholder details not already noted under company directors
- Nature of business, requiring a SIC code. Please note that dormant companies all use a SIC code of 99999.
- Charges and deadlines for submission for filing of Company Statements
There is a cost associated with the filing of the CS 01 form for Confirmation Statements, whether a company is a dormant or not, of £13 if submitted online.
After the first submission of a company’s Confirmation Statement, the deadline for completion with HMRC is the anniversary of the date of incorporation of the company. Thereafter, the due date will be a year from the date of the last submission. You also have more flexibility in submission without HMRC penalties, with up to 28 days allowed for submission after the due date without a penalty charge.
How can we help?
Often there is a requirement for forward tax planning to take full advantage of the tax reliefs available to you and your business so you can invest your hard earned cash back into your business. We strongly recommend you speak with a tax and accounting specialist like Southside Accountants. Please contact us to see how we as your accountants can help you run your business effectively.
Southside Accountants provide accountant services, including tax return services, to small businesses in the UK.
Written by Shaima Todd.