A Question From A Customer:
I am interested in obtaining a certain company, but I am not in a position to start trading with it for a while yet - can I register a company but leave it dormant?
Whilst you can register a company and then leave it dormant, you will need to ensure it meets certain criteria to make it eligible. But first things first, why would you register a dormant company?
Why You Might Want To Register A Dormant Ready Made Company
There are a number of reasons for leaving a company dormant after registering it.
• You may be protecting a brand name or trademark, or protecting / reserving a company name to prevent it from being registered elsewhere.
• You may be restructuring an existing business.
• You may be holding assets or intellectual property.
• It could even be a temporary measure upon the death or illness of the owner of the business.
In the case of obtaining a certain off the shelf company, you might have new plans for the business, or perhaps even a new trade in mind. Registering it as a dormant company will allow you to get everything set up in advance, allowing you to complete the necessary preparation before you start trading. It’s worth noting that you can still register or change the ready made company name while purchasing through Paramount. This will prevent competitors from registering your name as their own, allowing the business to have the opportunity to gain a sense continuity and maturity.
What Makes A Company Legally Dormant?
Your company is only dormant if it has stopped trading, or has no other income. Limited companies can be ‘dormant’ for Corporation Tax between setting up and starting to trade for the first time , or they can be registered dormant if trading has ceased. However, when you first start trading, you will need to tell HMRC the date that you started to trade when you register for Corporation Tax.
It is important to remember that a company needs to file accounts every 12 months, and the first set of accounts must be files within 21 months of incorporation. Read more about filing dormant accounts, and Paramount’s services here.
Your company would not be considered as dormant if it is:
• carrying on a business activity, such as trading.
• buying and selling goods with a view to making a profit or surplus.
• providing services.
• earning interest.
• managing investments.
• receiving any other income.
How To Make An Active Company Dormant
If your company was previously trading but is now dormant, you should contact the Corporation Tax Office in writing as soon as possible to inform them. After completing the necessary paperwork sent to you, your company will be considered dormant.
If a previously active company was also registered for VAT, you must tell HMRC that you have ceased making VAT-taxable supplies and that you wish to cancel this registration. You should do so within 30 calendar days of your company becoming dormant, this can be carried out online, or by post using the VAT 7 form. Provided HMRC is satisfied with your reason for cancelling, you will receive a letter confirming the date of cancellation and you will be required to file a final VAT Return and pay any VAT due.
In the case of buying a ready made company from Paramount Formations, you would need to purchase the off the shelf company, and then make it dormant. Similarly, a new company will need to be registered and then made dormant. We’d be happy to help with all of these arrangements.
Does HRMC Charge For Registering A Company As Dormant Or Active?
Provided the HMRC are fully informed, promptly, every step of the way you will not incur any government fees for registering your company as either dormant or active. Being aware of the criteria of a dormant company could allow you to save money on Corporation Tax whilst you’re not trading, allowing you to concentrate on other areas of the business until you’re ready.