A dormant company is a company that is not doing anything, and the definition matters because there are two of them. For Companies House a company is dormant if it has had no significant accounting transactions in the financial year, which allows it to file dormant accounts. For HMRC a company is dormant if it is not trading and has no other income, which means no corporation tax return until it starts. A company can satisfy one test and not the other, and most of the confusion around dormant company meaning comes from that. This page is written for the director who has a company they are not using, or a trading company they want to pause: the two definitions, what each body still expects, how to make a company dormant, and what wakes it up.
Dormant company meaning for Companies House
A company is dormant for Companies House if it has had no significant accounting transactions during the accounting period. Paying the Companies House filing fee, penalties for late filing and money paid for shares when the company was formed do not count as significant, so a company that has only done those is dormant. Anything else, a bank charge, a subscription, a sale, makes it not dormant for that year, and the full accounts have to be filed instead of the dormant ones. The test is transactions, not trading, which is why a bank account with a monthly fee keeps a company out of dormancy at Companies House.
What does dormant company mean for HMRC
For corporation tax a company is dormant if it is not carrying on a business and has no income, and HMRC treats a new company as dormant until it tells HMRC it has started trading or HMRC decides it has. A dormant company for HMRC has no corporation tax to pay and, once HMRC has agreed it is dormant, no return to file until it becomes active. The two tests can diverge: a company earning bank interest on its share capital is dormant for Companies House if the interest is its only transaction, but not for HMRC, because interest is income.
Making a company dormant
Stop trading, collect what is owed, pay what the company owes including the last corporation tax, and close or empty the bank account so no transactions run. Tell HMRC the company has stopped trading and the date, so it can be treated as dormant for corporation tax; file the final return and accounts for the last active period. Then the company files dormant accounts and a confirmation statement with Companies House each year, and nothing with HMRC unless asked. A company that keeps paying a subscription or a bank fee has not been made dormant, whatever the directors intend.
What a dormant company still has to do, and what wakes it
Dormant accounts and a confirmation statement to Companies House every year, on time, with the fee paid personally or from a source that is not the company; the £200 and rising Companies House penalties apply to a dormant company's late accounts as to any other. Any trade or income wakes it for HMRC: the company must tell HMRC within three months of starting, and a corporation tax return then follows for the period from that date. The dormant company accounts and tax return guide on this site covers the filing side, and the company tax return guide the return that follows a restart.
Questions people ask about dormant company
Can a company be dormant from the day it is formed?
Yes. A company formed and never used is dormant for both tests, provided nothing runs through it. HMRC will usually write asking whether it has started trading, and answering that it has not is what keeps it dormant for corporation tax.
Does a dormant company pay corporation tax?
No, because it has no profit. It also does not file a corporation tax return once HMRC has agreed it is dormant, unless HMRC sends a notice to deliver one, in which case the notice is answered rather than ignored.
Is a dormant company an associated company for marginal relief?
No. A company that has not carried on a trade or business at any time in the period does not count as an associate when the corporation tax limits are divided, per gov.uk. That is one of the few tax consequences of dormancy that helps the active company alongside it.