Making Your Contracting Limited Company Dormant

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Making your contracting limited companydormant

Introduction

You might decide to take a break from contracting, or perhaps use an umbrella

solution for a while. One option would be closing down your limited company which

can be costly and time consuming.

If you believe you will need the company in the future then it might be better to

make the company dormant for a while. This article describes what is involved.

Matters Leading up to dormant company status

Preparing final trading accounts

o Use the companys usual accounting reference date.

o Companies House expects accounts made up to the usual financial year end,

regardless of the date that the company actually ceased trading within the year.

Pay final Corporation Tax

o File final trading accounts with the corporation tax inspector

o Provide final corporation tax return (form CT600) with computation.

o Following agreement and settlement of the final corporation tax assessment,

advise the corporation tax inspector that the company is now dormant.

Close payroll

o Close the payroll scheme by notifying the Inspector that trading has now

ceased and there are no employees.

o The Inspector of Taxes dealing with the payroll affairs will then issue a final

form P35 for the current tax year ended on the following 5 April. This form should

be completed without delay and filed together with any associated P14s, P11D,

etc.

Close bank accounts

o All interest bearing bank accounts should be closed

o It may be desirable to close any non interest bearing current accounts, in

order to avoid bank correspondence/statements being issued.

Terminate accountant services
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o Advise your company accountant and let any other professional acting for

company know that any ongoing services/agreements are to be terminated while

the company is dormant.

Matters Arising During Dormant Company Period

Companies House

o Even though the company is dormant, an Annual Return must be filed at

Companies House together with the 15 fee.

o Complete a dormant Companies House form (DCA), made up to the usual

accounting reference date.

Registered Address

o The company will need to maintain a registered office address, which can be

either your home address or your accountants office address.

o Companies House will need to be advised if there are any changes in the

company director or secretarys circumstances, by filing the appropriate change of

director/secretary form (form 288C), which can be downloaded from the

Companies House website.

Cease Trading

o It is important to ensure that the company does not undertake even a single

trading transaction, including receipt of bank interest or revenue generating

transaction.

o Any such transactions occurring would require full trading accounts to be filed

and the corporation tax return made to HMRC.

Published: Monday, April 03, 2006


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Chapter 8 - Dormant company accounts

1. What is a dormant company?

A company is dormant if it has had no 'significant accounting transactions' during the accounting period. Asignificant accounting transaction is one which the company should enter in its accounting records.

When determining whether a company is dormant you can disregard the following transactions:

payment for shares taken by subscribers to the memorandum of association;

fees paid to the Registrar of Companies for a change of company name, the re-registration of acompany and filing annual returns; and

payment of a civil penalty for late filing of accounts.

2. What are the conditions that a dormant company must meet to be exempt from audit?

A dormant company is exempt from having an audit for that financial year if:

it has been dormant since its formation; or

it has been dormant since the end of the previous financial year and it meets the followingconditions:

it is entitled to prepare individual accounts in accordance with the small companies regime;

it is not required to prepare group accounts; and

it qualifies as a 'small company' in relation to that year (see Chapter 6), or would have qualified assmall but for the fact that it is a public company or is a member of an ineligible group.

3. What exemption is available?

Dormant companies can claim exemption from audit and need only prepare and deliver to Companies

House an abbreviated balance sheet and notes. You do not have to include a profit and loss account anddirectors' report in dormant company accounts filed at Companies House, but you must provide a directors'report to members.

A company may not take advantage of the dormant company audit exemption if at any time in the financialyear in question it:

is a public company unless the company is dormant;

is an authorised insurance company, a banking company, an e-money issuer, a MiFID (ie Marketsin Financial Instruments Directive) investment firm or a UCITS (i.e.Undertakings for CollectiveInvestment in Transferable Securities) management company; or

carries on insurance market activity;

Nor can a company take advantage of the dormant company audit exemption if an audit is required by amember or members holding at least 10% of the nominal value of issued share capital or holding 10% of anyclass of shares; or - in the case of a company limited by guarantee - 10% of its members in number. Thedemand for the accounts to be audited should be in the form of a notice to the company, deposited at theregistered office at least one month before the end of the financial year in question. The notice may not begiven before the financial year to which it relates.

A company is not entitled to the dormant company audit exemption unless its balance sheet contains thestatements referred to in question 5 below.
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4. What information must dormant company accounts contain?

Dormant company accounts submitted to Companies House need not include a profit and loss account ordirectors' report.

Unaudited dormant accounts are much simpler than those of a trading company but must contain:

a balance sheet containing statements above the director's signature and their printed name to theeffect that the company was dormant throughout the accounting period see question 5.

any previous year's figures for comparison - even though there are no items of income orexpenditure for the current year; and

certain notes to the balance sheet.

The right to prepare a dormant balance sheet for filing at Companies House does not affect the companysobligations to prepare full accounts for its members see chapter 4.

5. What statements do I need to make on the balance sheet?

If you submit your accounts to Companies House on paper, you must check that you have the following

statements above the director's signature and printed name:

Audit Exemption Statement

For the year ending . (dd/mm/yyyy) the company was entitled to exemption fromaudit under section 480 of the Companies Act 2006 relating to dormant companies.

Directors responsibilities:

The members have not required the company to obtain an audit of its accounts for the yearin question in accordance with section 476; and

The directors acknowledge their responsibilities for complying with the requirements of theAct with respect to accounting records and the preparation of accounts.

A private company that qualifies as small should also include the following statement on the balance sheet:

These accounts have been prepared in accordance with the provisions applicable to companiessubject to the small companies regime.

Accounts submitted online have inbuilt checks which will prevent common errors and omissions of thenecessary statements.

6. Can I obtain a standard form for dormant accounts from Companies House?

Yes. WebFiling offers a simple web form enabling easy and quick electronic submission of dormantaccounts for companies that have never traded. These contain inbuilt checks so that you can be sure you

havent omitted any key information.

Alternatively, you can download a paperform AA02 , available from www.companieshouse.gov.uk , which isfor dormant companies that have not traded since incorporation where the company is not a subsidiary. Thisform is unsuitable for companies that became dormant after trading. In this case, you will need to preparedormant accounts as described in question 4 and 5 of this chapter.

7. How long do I have to submit dormant accounts to Companies House?

You have the same time allowed for filing as for other accounts, and the same penalties for late filing apply.
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8. What happens if my company starts trading again?

The company will cease to be exempt from audit as a dormant company if it:

begins commercial or trading activities during the financial period; or

would no longer qualify for some other reason, eg because there have been significant accounting

transactions that need to be entered in its accounting records.

If either of these happened, you might have to submit full accounts for the financial year in which thecompany ceased to be exempt, and the directors might need to appoint auditors for the company. However,it may be that the company would qualify for exemptions as a small company. More information aboutcompany audit requirements and audit exemption for small companies is covered in chapter 6 of this guide.

Dormant limited company guide for contractors

Posted May 1, 2009

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RssIT contractors may choose to buy a dormant company to protect the name, or simply if theyare considering using a limited company in the near future.

Contractors who are currently working via limited companies may also decide to make theircompanies dormant if they intend to cease trading, and may want to use the company againin the future. This means they don't have to go through the administrative processes involvedin closing a company down for good.

This might happen if a limited company contractor switches to use an umbrella company for aperiod of time, or if they are taking a prolonged break from the contracting world for whateverreason.

Dormant Limited Company Responsibilities

There are no time limits to how long you can keep a limited company in 'dormant' mode, butthere are a number of tasks you are still obliged to carry out:

1. You must still complete an Annual Return and file it with Companies House.

2. You must still file Annual Accounts with Companies House(a balance sheet and anyrelevant notes).

3. For Companies which have never traded, their annual accounts can be submitted viaFormDCA(PDF). Companies who have previously traded, but have since become dormant may alsobe able to use Form DCA, but only if no transactions have been recorded in the currentfinancial year and no residual balances exist.

4. Whilst the company is dormant, you must not generate any accounting transactions.

5. You must still informCompanies House to any changes in company personnel, or registeredaddress changes.

6. The only allowable transactions for dormant companies are- payment for shares taken by subscribers to the memorandum of association;- fees paid to the Registrar of Companies for a change of company name, the re-registrationof a company and filing annual returns; and- payment of a civil penalty for late filing of accounts.
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7. As a dormant company director, you can still be prosecuted if you don't submit documentsto Companies Housewithin the prescribed deadlines.
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Making Your Contracting Limited Company Dormant