One of our site visitors recently asked us: “I haven’t had a contract for a while, so I’ve not been working through my limited company – do I still need an accountant?”
If you’re no longer using your limited company, it’s worth considering your longer-term plans when deciding whether to close it altogether or register it as dormant.
For each option, you’re obliged to make some filings and submissions to HMRC and Companies House.
So, let’s start with a brief explanation of what is required for each:
Registering your limited company as dormant
Perhaps you’re out of contract but waiting for the next opportunity, or you’re unsure of your future plans but want to protect your company name and brand.
If closing your company feels too permanent, you can keep it but register it as dormant with Companies House and HMRC.
HMRC’s conditions of dormancy are that your company must not be carrying on any business activity, trading or receiving any income. Companies House has slightly different rules.
A company is generally dormant if it has no significant accounting transactions, although certain transactions, such as Companies House filing fees, are permitted.
So, if you still have bills to settle, taxes to pay, and loose ends to tie up, it’s important to confirm whether your company meets the relevant conditions.
See our guide to claiming expenses while your limited company is dormant.
A dormant company is still registered at Companies House, and regardless of any transactions or activity, you’ll need to submit annual dormant accounts and confirmation statements.
You’ll need to notify HMRC that the company is dormant for Corporation Tax purposes, deal with any outstanding returns and tell HMRC if you begin trading again. If your company is registered for VAT and PAYE, you’ll need to consider whether to close these registrations.
This isn’t always necessary, particularly if you plan to start trading again. See our guide to deregistering your limited company for VAT.
It may be that you don’t quite fit into the above criteria, and if you can’t quite classify your company as dormant, for example, you may have a low number of transactions going through your company and have a period of no income, it’s worth talking your situation through with your accountant to discuss your needs.
Even if your company is not fully dormant, you’ll still need to submit annual accounts and any required Corporation Tax, VAT, and PAYE returns, although the type of accounts you file will depend on your company’s circumstances.
Closing your limited company
If closing your company is the route you’ve decided, there are some things you’ll need to consider, outlined in our guide to closing your company, and your accountant will be on hand to advise the most appropriate way to do this.
They’ll also handle your final accounts and Corporation Tax submissions, and help with the company closure process, which may involve submitting a DS01 application to Companies House.
If your company has substantial funds or assets remaining, a Members’ Voluntary Liquidation (MVL) may be worth considering instead. You can read more in our guide to Members’ Voluntary Liquidations.
Some accountancy firms will consider your period of inactivity and recommend a reduced fee, so it’s best to discuss your business’ requirements with them and their fee structure.
